EURUSD could be in for a short-term reversal from its recent selloff, as the pair formed a double bottom pattern on its 1-hour time frame. Price has yet to test and break above the neckline of the formation around the 1.1300 major psychological resistance before conforming the potential climb.
The 100 SMA is still below the 200 SMA for now, which suggests that the downtrend might still resume. If so, another move towards the previous lows at the 1.1100 handle could take place.
An upside break past the neckline, however, could mean as much as 200 pips in gains for EURUSD since the double bottom formation is of that height. Stochastic is already indicating overbought conditions while RSI is also suggesting that the move might be overdone already.
FOMC officials shared mixed views about a potential liftoff later this year, as Fed member Evans cautioned about the risks of hiking too early. He noted that inflation is still far below target and that China poses further uncertainties on the global economy.
Other Fed officials, namely Dudley and Williams, seemed to be more optimistic about an interest rate hike taking place later this year. This view is also shared by Fed head Yellen and FOMC member Lockhart.
German preliminary CPI and Spanish flash CPI data are up for release today, as the Catalonia polls might also have an impact on euro price action. For now, traders seem to be unwinding their short positions following Draghi’s remarks that further ECB easing isn’t set in stone just yet.
By Kate Curtis from Trader’s Way