A speech by ECB head Lagarde and the release of the euro zone industrial production report might be worth watching if you’re trading this pair today.
Will EUR/USD follow-though on this break-and-retest setup?
Before everything else, let’s have a quick recap of the market movers in the past trading sessions:
- JOLTS job openings at 6.53M vs. 6.42M forecast in November
- IBD/TIPP Economic Optimism index up from 49.0 to 50.1
- Fed official George generally optimistic about recovery
- Fed official Mester: Policy need not change as long as medium-term outlook remains intact
- U.S. House calls on VP Pence to remove Trump from office via 25th Amendment
- U.S. requires international travelers to show negative COVID-19 test results
- U.S. daily coronavirus death toll hits new record high near 4,500
- Japanese Economy Minister seeking coronavirus emergency declaration for seven more prefectures
- Bank of Japan considering cutting economic growth forecast
- API: Crude oil stockpiles fell by 5.8 million barrels
- China reported its biggest increase in confirmed COVID-19 cases in over five months
- New Zealand ANZ commodity prices up by 1.8%
- Japanese preliminary machine tool orders increased by 8.7% y/y
Upcoming Potential Catalysts on the Economic Calendar:
- ECB Chairperson Lagarde to speak at Reuters event at 10:00 am GMT
- Eurozone industrial production at 11:00 am GMT
What to Watch: EUR/USD
EUR/USD recently fell below its rising trend line support on the 1-hour chart, indicating that a reversal is in order.
Before that happens, price might need to retest the area of interest to gather more selling energy. The Fib retracement tool shows that this is around the 61.8% level or 1.2267.Technical indicators confirm that bears could have the upper hand, as the moving averages showed a bearish crossover while Stochastic is indicating overbought conditions.
If sellers are eager to return, the 38.2% level might already be enough to keep gains in check as it lines up with the 100 SMA dynamic inflection point. A continuation of the slide could take EUR/USD back to the swing low at 1.2132 or even much lower.
Note that the dollar could stay supported after Fed officials shared a relatively upbeat outlook for the economy and monetary policy. At the same time, risk-off flows stemming from pandemic concerns might keep the safe-haven currency afloat.
ECB head Lagarde’s speech could be a catalyst for the shared currency, along with the release of the eurozone industrial production figures. In any case, stay on the lookout for additional EUR/USD volatility in the next few hours!