The 1.0400 handle seems to be holding as a long-term floor for EURUSD once more, as price bounced off this area and might now be headed back to the top of its range around 1.1500. This range has held since February last year and might continue to do so.
However, the 100 SMA is below the longer-term 200 SMA on the daily chart, signaling that the long-term path of least resistance is to the downside. In that case, a range breakdown is still possible and this could potentially send EURUSD lower by the same height as the rectangle formation of over a thousand pips.
Stochastic is still pointing up on the daily chart to show that buyers are in control of price action. However, the oscillator is already dipping into the overbought zone so profit-taking could happen and allow sellers to regain control.
US President Donald Trump’s inauguration speech seems to have kept a lid on dollar gains as investors continue to be nervous about his fiscal policy plans and a potential trade war. After all, Trump’s remarks could have repercussions on its trade ties with China, Mexico, Canada, and other big economies.
For the euro zone, the region’s consumer confidence index is due today and no change in the -5 reading is eyed. ECB Governor Draghi has a speech lined up but he is expected to simply repeat his remarks during their monetary policy statement’s presser, reiterating that the pickup in inflation was just mostly energy-based.
There are no major reports due from the US economy today as traders also brace themselves for the advanced GDP release later on in the week. Another potential catalyst for this pair is the UK High Court ruling, which could have an impact on how Brexit negotiations play out, both for the UK and the euro zone.
By Kate Curtis from Trader’s Way