EURUSD has been selling off recently but it could be approaching a turning point as it nears the bottom of the longer-term ascending channel visible on the 4-hour time frame. Price could test support at the 1.0650 minor psychological level and bounce right back up to the resistance at 1.0950 to 1.1000.
Stochastic is deep in oversold territory, which means that sellers are already exhausted. Once the oscillator turns higher and climbs out of the oversold area, buying pressure could kick in and keep losses contained. However, if selling pressure persists, EURUSD could break below the channel support and start a downtrend.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is still to the upside. Price broke below the 100 SMA dynamic support to reflect some bearish momentum but it could still find support at the 200 SMA dynamic inflection point near the bottom of the channel.
Economic data from the euro zone turned out weaker than expected, with the Spanish flash CPI showing a 2.3% gain versus the projected 2.6% increase and the German preliminary CPI up 0.2% versus 0.4%. This led traders to doubt that the ECB can sustain its shift to a less dovish stance with weaker inflationary pressures in play.
To top it off, Brexit-related uncertainties could continue to dampen the shared currency’s gains as forcing the UK to give up access to the single market could also have repercussions for euro zone trade activity. UK net lending to individuals came in line with expectations but BBA mortgage approvals came up short.
German retail sales data is due today and a 0.7% rebound is eyed. German unemployment change is also due, along with French consumer spending and preliminary CPI. As for the UK, the final GDP reading for Q4 is lined up, along with the current account balance. No revisions are expected for the 0.7% growth figure.
By Kate Curtis from Trader’s Way