EURUSD Technical Setup Hints That It Could Still Rally; ZEW Reports Due Today
The technical setup of EURUSD looks interesting, to say the least. On the higher time frame, we reported yesterday that a head and shoulders chart pattern has materialized. This chart pattern is widely viewed as a bearish indicator. However, if you look closely on the hourly time frame today, you will see the mirror-opposite of it. An inverse head and shoulders pattern has formed after EURUSD made a higher low succeeding two lower lows. Conversely, this is a bullish indicator. The most recent low suggests that there are buyers present in the market.
Today’s report could dictate the direction of the currency pair. As of this writing, EURUSD is trading below the neckline resistance of the head and shoulders chart pattern on the higher time frame. A bearish close below today’s Asian session lows at 1.1087 would invalidate the bullish signal on the hourly chart. It could then mean that EURUSD is on its way to support around 1.1000.
Worse-than-expected ZEW Economic Reports could trigger this. At 10:00 am GMT, the German ZEW is expected to print at 15.2. Meanwhile, the euro zone ZEW report is eyed at 16.3. These numbers are higher than their December readings at 10.7 and 16.3, respectively. They suggest that investors are feeling optimistic about economic conditions. However, misses could spark concerns about the German or euro zone economy and drag EURUSD lower.
On the other hand, positive reports could push the currency pair above yesterday’s high at 1.1101 and complete the inverse head and shoulders. It could mean that there are enough buyers in the market to push EURUSD to resistance at the falling trend line around 1.1150.