EURUSD Forms Bearish Flag at Trend Line Support; Euro Zone Data Eyed
EURUSD had a volatile trading day yesterday. The currency pair initially traded higher to an intraday high at 1.1172 following the release of the ECB meeting minutes. According to the report, the central bank sees a “solid upward trend in underlying inflation excluding holiday costs.” This hinted that the ECB is in no hurry to ease monetary policy anytime soon given that inflationary pressures remain.
Positive US Data Weigh Down EURUSD
However, EURUSD quickly gave up its gains following the US retail sales report. The headline figure for December came in as expected at 0.3%. However, core retail sales (excludes automobile sales), printed higher at 0.7% versus 0.5%. It also helped that the Philly Fed Manufacturing Index printed much better at 17.0 versus the 3.7 forecast.
The readings sparked demand for the US dollar because they eased concerns about the economy following the disappointing NFP report last week. Consequently, EURUSD fell to an intraday low at 1.1127 before finishing the day at 1.1135.
Economic Reports Due Today
For today, a few reports are scheduled which could spark volatility on EURUSD. At 9:00 am GMT, euro zone’s current account is seen to come in at 34.3 billion EUR for December. Then at 10:00 am GMT, the region’s final CPI and core CPI readings are both estimated at 1.3%.
At 10:00 am GMT, the US housing starts and building permits are due. They are seen at 1.38 million and 1.47 million, respectively.
Better-than-expected data from Europe or disappointing US figures could be bullish for EURUSD. Meanwhile, lower-than-expected numbers from Europe or positive US data could be bearish for the currency pair.
On the hourly time frame, we can see that EURUSD is currently testing support at the rising trend line from connecting the lows of January 10, January 14, and January 16. However, it’s worth noting that a bearish flag has formed. When you attend our forex trading course, you will learn that this chart pattern is characterized by a consolidation following a strong drop. A closer look at the most recent candles also show that EURUSD looks to have broken below the consolidation too. A bearish close below yesterday’s low at 1.1127 could mean that sellers are looking to push EURUSD to its January 14 lows at 1.1104. However, a bullish engulfing candlestick pattern may suggest that there are enough buyers at the support level. If this is the case, we could soon see EURUSD re-test yesterday’s highs at 1.1170.