Here’s a simple consolidation pattern on EUR/USD’s short-term chart!
Are there any catalysts that could spur a bounce or a break?
Before we look at the setup, make sure you’ve read all the major headlines that have moved the markets during the Asian session:
- U.S. ISM manufacturing PMI down from 60.7 to 58.7 vs. 60.0 forecast
- Canadian manufacturing PMI down from 57.9 to 54.4
- CME increased margin on silver futures by 18%
- Tensions in Myanmar rise as U.S. threatens sanctions
- Asian markets still in the green as sentiment remains positive
- RBA kept interest rates and policy unchanged as expected
- South Korean gov’t prepping for another round of pandemic aid
Upcoming Potential Catalysts on the Economic Calendar:
- 10:00 am GMT: Euro zone flash GDP
- New Zealand GDT auction
What to Watch: EUR/USD
Don’t look now, but this pair is sitting right at the bottom of its descending triangle on the 1-hour chart!
Will it bounce back to the top or make a break for it?
The euro zone is scheduled to print its Q4 2020 GDP reading, and it’s looking like an upside surprise might be in the cards. After all, the German and Spanish preliminary GDP readings released last week both came in better than expected.If that’s the case, the pair could bounce right back up to the triangle top around 1.2135. Stochastic is moving up to confirm that buyers still have some energy left.
However, the 100 SMA is below the 200 SMA to signal that the path of least resistance is to the downside. In other words, there’s a pretty good chance of a breakdown.
If that happens, EUR/USD could tumble by roughly the same height as the chart formation, which spans around 150 pips.