EURUSD finished last week’s trading over 4% higher. However, its recent price action suggests that the currency pair may soon drop by almost 150 pips ahead of today’s roster of economic data.
On the hourly time frame, it can be seen that EURUSD has made lower highs following a series of higher highs. Consequently, this has allowed for a head and shoulders pattern to form. This chart pattern is considered as a bearish reversal pattern and a break below today’s low at 1.0982 would effectively break the neckline and trend line (from connecting the lows of March 23, March 24, and March 25) support. The next floor on EURUSD could be at 1.0875 where the 200 SMA is and where the currency pair peaked on March 23.
What can trigger a sell-off on EURUSD?
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Aside from risk aversion stemming from the coronavirus pandemic, there is also the roster of economic data from the euro zone. At 6:45 am GMT, French consumer spending for February is expected to have contracted by 0.7%. Meanwhile, the country’s preliminary CPI for March is seen at -0.4%.
Then at 7:55 am, Germany’s unemployment change report for February is estimated to have risen by 23,000.
At 9:00 am GMT, the euro zone CPI for March is forecasted at 0.8% compared to a year ago. Meanwhile, excluding volatile items, the core CPI reading has a 1.1% consensus.
Worse-than-expected data could be bearish for EURUSD. Alternatively, positive figures could help fuel the rally on the currency pair.
A close above today’s Asian session highs at 1.1052 could mean that there are still enough buyers in the market. EURUSD may soon then trade higher to retest last week’s highs at 1.1140.
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