EURUSD has had trouble breaking past the 1.1400 major psychological barrier and has formed a double top pattern on its 4-hour chart. This reversal signal could indicate that the previous uptrend is over and that selling pressure is building up.
Price has yet to break below the neckline support before confirming the potential selloff, which might last by around 500 pips or the same height as the chart pattern. However, if the 1.0900 area holds as support, another bounce to the previous highs might take place.
The 100 SMA is above the 200 SMA for now, which means that the rally could still resume. RSI is in the middle of its range, which means that price could go either way. Stochastic is pointing down, suggesting a potential drop, but is also in the middle.
Event risks for this setup include the EU Summit, during which Plan B for Greece might be discussed. The lack of any kind of resolution for the debt-ridden nation could keep fears of a Grexit and debt contagion on the table, which would be negative for the euro.
Safe-haven flows are keeping the US dollar supported so far, as China hasn’t seen much of a recovery in its crashing stock market. Further declines could keep dragging risk sentiment down and possibly leading to more demand for the lower-yielding dollar.
Only the trade balance and JOLTS job openings report are up for release from the US economy today and these might not have such a huge impact on dollar price action. The trade deficit is set to widen to 42.5 billion USD while the jobs data could show a drop to 5.33M in job openings, which might be negative for the dollar, especially if the actual readings miss expectations.
By Kate Curtis from Trader’s Way