EURUSD Slightly Higher Ahead of Euro Zone Trade Balance Data. Can It Extend Its Gains?

Among the non-safe haven currencies, EURUSD is the only one that is trading in the green against the US dollar. As of this writing, the currency pair is trading at 1.1265, 9 pips above its opening price. With the euro zone trade balance data due in a couple of hours, can it extend its gains?

Risk aversion has weighed down on most major currency pairs today. Most of it has been driven by fears of the US imposing another round of lockdowns as the country’s confirmed coronavirus cases continue to rise. As of this writing, it is already at 2,094,058. The dollar has benefited from this news for the most part because of its safe haven credibility.

However, the euro could attract some bids in today’s trading if the euro zone trade balance report for April tops forecasts. Due at 10:00 am GMT, the report is expected to print a trade surplus of 20.3 billion EUR.

A better-than-expected figure could be bullish for EURUSD On the contrary, a disappointing reading could be bearish for the currency pair.

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EURUSD Outlook

On the 1-hour time frame, it can be seen that EURUSD has recently made lower highs after a series of higher highs. Consequently, a head and shoulders pattern has formed. When you enroll in our free forex trading course, you will learn that this is considered as a bearish reversal pattern. The currency pair has already broken the neckline support at 1.1258. In fact, it could be that EURUSD is testing this level for resistance as it retraced some of its losses to the 38.2% Fib level (when you draw the Fibonacci retracement tool from the high of June 12 to today’s lows). Reversal candlesticks could mean that resistance is holding and that EURUSD could soon fall to near-term support at 1.1234. If support does not hold, the next floor could be at 1.1080 where the currency pair bottomed on May 29.

Alternatively, a strong bullish close above Friday’s high at 1.1339 could invalidate the head and shoulders chart pattern. Consequently, it could hint at more upside potential to near-term resistance at 1.1400.

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