EURUSD Tests the Neckline Of A Head and Shoulders Patterns While Remaining Bearish
The EURUSD pair trades with a bid tone after the September 2020 NFP data despite the unemployment rate in the United States dropping. The USD pairs reacted to the news that President Trump got infected with COVID-19 and that changed the balance in the currency market.
After the ECB talked the Euro down as it reached the 1.20 level, the expectations grew that we would see more Quantitative Easing from the ECB. That is especially true after last Friday’s inflation data dropped further, threatening to break into deflationary territory.
Weak Inflation Data Warrants PEPP Expansion
After last Friday’s disappointing inflation data, the EURUSD failed to push lower. One reason for that is the fact that the market waited for the NFP data and so the USD did not appreciate against the Euro as the inflation data suggested.
The expectations are growing that the ECB will increase the size of the QE program in the months left until the end of the year. The question is when will the ECB move – in October or December?
Considering that the U.S. election date is November 3rd, the chances are that the ECB will increase the PEPP program in December rather than October. Rumors on the market are that the ECB will increase the QE by half a trillion Euro, putting pressure on the common currency.
EURUSD Technical Analysis
The EURUSD pair currently consolidates just below the neckline of a head and shoulders pattern. It broke lower, and now it is retesting the level, offering a risk-reward ratio that exceeds 1:2.
To trade it, bears may consider entering at market and having a stop loss at the highest point in the right shoulder. By projecting the risk twice to the downside, then the logical place to exit is 1.1500 area.