EURUSD is making its way to the bottom of its longer-term range at the 1.0500 major psychological level and might be due for a bounce. If so, price could make its way back up to the range resistance at the 1.0600 area or at least halfway until the 1.0550 minor psychological mark.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance could be to the upside. However, the moving averages are oscillating to reflect range-bound conditions. Stochastic is heading south to show that sellers are in control of price action, but the oscillator is already in the oversold area so buyers could regain the upper hand soon.
Economic data from the euro zone has been mixed recently, although Germany has been showing a lot of weak spots. Earlier in the week, German factory orders showed a 7.4% slide versus the projected 2.5% dip while the French trade balance showed a larger than expected deficit.
But what’s driving this pair’s price action more predominantly these days is dollar strength, as traders are pricing in strong expectations of a Fed rate hike this month. The ADP non-farm employment change for February came in at 298K versus the projected 185K figure while the January reading was upgraded. This signals a potential upside surprise for the NFP due on Friday and this would confirm that a rate hike is underway for the Fed meeting next week.
The ECB is set to announce its monetary policy decision today and no changes are expected. However, the accompanying press conference could mean a lot of volatility for the euro, especially if Governor Draghi shares more insight on their next policy steps. If he continues to downplay developments in the region or highlights the risks, the euro could break below its range against the dollar.
By Kate Curtis from Trader’s Way