EURUSD made a comeback in yesterday’s trading as risk aversion eased. The currency pair consolidated during the Asian session but broke to the upside during the European session to an intraday high of 1.1205. By the end of the New York session, EURUSD had settled at 1.1191 with a 34-pip gain.
US-Iran Tensions Eased
News headlines were relatively quiet on developments regarding the US-Iran conflict. To investors relief, Iran has not yet retaliated and there were no news of violent moves between the two countries. We did, however, hear news that Iraq wants to expel US troops from its borders. To which US President Donald Trump threatened the country with economic sanctions.
Positive Euro Zone Data Boosts EURUSD
It also helped the euro that data came in better than expected yesterday. German retail sales for November topped forecasts at 2.1% versus 1.1%. The Spanish services PMI also showed resilient growth in the country’s services sector as it printed at 54.9, higher than the 53.9 estimate. The French final services PMI for December came in as expected at 52.4. Meanwhile, the German and euro zone final services PMI for the same month topped expectations at 52.9 and 52.8, respectively. Analysts had only predicted the reports to come in at 52.0 and 52.4.
Economic Reports Due Today
Today, inflation and consumer spending data from the euro zone may help the euro find some bids. At 10:00 am GMT, the euro zone flash estimate is seen to print at 1.3% for December. Both the headline and core (excludes volatile items) readings are seen at this figure. Meanwhile, retail sales for November is expected at 0.6%.
Meanwhile, at 3:00 pm GMT, the ISM non-manufacturing PMI is estimated to show that the services industry in the US continued to expand in December. The forecast is at 54.5, higher than the 50.0 baseline reading that indicates expansion.
Better-than-expected euro zone or disappointing US data would be bullish for EURUSD. On the other hand, worse-than-expected euro zone or positive US figures would be bearish for the currency pair.
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EURUSD Outlook
On the hourly time frame, we can see that the inverse head and shoulders pattern that I pointed out yesterday on EURUSD played out well. However, after the bullish rally during yesterday’s European session, the currency pair just spent the rest of the day consolidating. In fact, connecting its most recent highs and lows, a symmetrical triangle becomes apparent.
Now, a bullish close above the falling trend line around 1.1120 could mean that buyers are looking to push EURUSD to yesterday’s highs at 1.1205. If there is enough buying pressure, we may even see it rally to its December highs at 1.1237.
On the other hand, sellers will need to overcome a confluence of support around 1.1190. For one, this area coincides with the rising trend line when you connect the lows of January 3 and January 6. The 100 SMA also aligns nicely at this price. Lastly, when you draw the Fibonacci retracement tool from yesterday’s low to its swing high, the price coincides with the 38.2% Fib level. A bearish close below this price may mean that EURUSD may be headed to 1.1155 where it could test support at the 200 SMA.
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