ECB President Lagarde had very little surprise to offer the markets in her speech yesterday. Consequently, EURUSD finished yesterday’s trading unchanged. However, technicals suggest that it may soon rally. Yesterday, the currency pair traded within a 53-pip range before it closed at 1.1294, 3 pips above its opening price.
In a speech before the European Parliament Economic and Monetary Affairs Committee, she said that she was confident that German courts would rule in favor of the ECB’s bond buying program. If you remember, last month, a German court questioned the legalities of the central bank’s latest QE initiative. Lagarde’s remarks may have been bullish for the euro because it hints optimism that the rift between Germany and the ECB would soon be sorted out.
It’s also worth pointing out that German industrial production missed expectations. The actual reading was at -17.9% versus the -16.0% consensus. Despite this, EURUSD still held on to its ground.
Today, Germany will release its trade balance data for April at 7:00 am GMT. It is eyed to come in at 11.9 billion EUR. Then at 10:00 am GMT, the euro zone’s final employment change report is seen at -0.2%. Alongside this, the revised GDP reading for Q1 2020 is expected at -3.8%.
Better-than-expected figures could be bullish for EURUSD. Alternatively, disappointing readings could push EURUSD lower.
On the 1-hour time frame, it can be seen that EURUSD is testing a confluence of support. For one, the currency pair is testing support at the rising trendline from connecting the lows of May 26, May 27, June 4, and June 8. The current price where EURUSD is currently trading now, around 1.1290, also coincides with the 50% Fib level when you draw the Fibonacci retracement tool from the low of June 4 to the high of June 5. Additionally, a closer look at the currency pair’s recent price action shows that EURUSD made higher lows after a series of higher highs. Consequently, an inverse head and shoulders has formed.
When you enroll in our free forex trading course, you will learn that this is widely considered as a bullish reversal indicator. A strong bullish close above yesterday’s highs at June 8 1.1319 may mean that EURUSD could soon rally to its June 5 highs at 1.1383.
On the other hand, a bearish close below yesterday’s low at 1.1269 would invalidate the chart pattern, Fibonacci levels, and trendline. It could then mean that EURUSD could soon sell-off to near-term support at 1.1192 where the currency pair bottomed on June 4.