Remember the inverse head and shoulders pattern I pointed out on EURUSD yesterday? Price broke above the neck line resistance. It was brought about by the German ZEW Economic Sentiment report which topped its 15.2 forecast at 26.7. However, there were not enough buyers to push EURUSD to its January 16 highs at 1.1160. The currency pair actually quickly erased its gains and closed at 1.1080 for the day.
Today, the 4-hour chart of EURUSD shows that the head and shoulders pattern we featured earlier this week is still valid. Price is currently below the neckline support, trading around 1.1080. However, it would not be unusual for the market to push EURUSD higher before it drops. As you will learn when you enrol in our forex trading course, this chart pattern is widely considered as a bearish indicator. You can probably eye 1.1110 for resistance where the neckline and falling trend line (from connecting the highs of December 31 and January 16) coincide.
The ECB rate decision is due tomorrow and given that there are no economic reports due from the US and the euro zone today, EURUSD could get a boost on reports that efforts are being made to contain the coronavirus.
On the other hand, news that infection could be getting out of hand would be bullish for the currency pair. A break of today’s low at 1.1075 could mean that EURUSD is headed to 1.0990 where it bottomed on November.