With a lot of euro zone economic reports on tap today, I’m keeping my eyes on this retracement opportunity on EUR/USD.
On a technical basis EUR/USD is sitting at a 38.2% Fib on the 1-hour time frame. Not only that, but it’s also near a previous area of interest and just below the 100 SMA. Oh, and Stochastic is also about to reach the overbought territory!
This short setup could play well if today’s euro zone reports surprise to the downside. At 5:00 am GMT we’ll see Germany’s retail sales numbers, which is expected to grow by 1.0% after showing a 0.6% decline last month. This will be followed by German unemployment data at 7:55 am GMT and the euro zone’s inflation numbers at 9:00 am GMT.
Remember that Germany’s reports will always be under the spotlight as it’s the region’s biggest economy. Likewise, market players will pay close attention to the euro zone’s consumer prices as it’s currently at 0.5%, way below the ECB’s aim to keep it just below 2.0%. Investors expect inflation to remain at 0.5% in July but some believe that Germany’s 0.8% reading (down from 1.0%) printed early this week could already drag the overall figure. If the report disappoints, then traders might take the ECB’s threats of additional stimulus more seriously.
I’m planning to at least wait for the reports’ release before I pull the trigger and risk 0.5% of my account. I’m setting my sights on 1.3400 as my initial entry with a 50-pip stop just above the 100 SMA. If the reports surprise to the upside then I might consider entries at higher areas of interest. I’ll also consider a breakout trade in case the pair makes new weekly lows before all the reports are out.
What do you think of this plan?