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Forex: EUR/USD still range bound ahead of busy economic calendar week

FXstreet.com (Barcelona) - Forex: EUR/USD still range bound ahead of busy economic calendar week

The EUR/USD finished the day slightly higher, up 26 pips at 1.2981. The pair traded as low as 1.2941 at one point, but again held the important support level which marks the lower end of the trading range the pair has been in since mid March. The main economic data released during the course of the previous day was US Retail Sales, which came in better than expected at 0.1% actual vs. -0.3% forecast. Market participants should be aware of the upcoming German Zew data due out at 9:00GMT. This is just one of many important economic indicators that will be released from both Europe and the US during the course of the week. The pair is currently edging higher during Asia trade, up 30 pips at 1.3010.

According to Kathy Lien of BK Asset Management, “Tomorrow's German ZEW survey and Wednesday's first quarter GDP reports will be particularly important for the EUR/USD. While the recent ECB rate cut, rise in equities and increase in German industrial production should boost investor confidence and hence the euro, if the ZEW survey surprises to the downside, the currency pair may finally see a sustained break below 1.2950.

She went on to add, “Even if the data is good, we are skeptical about how long EUR/USD can hold this key level. With the ECB moving towards more stimulus and the Fed less, it should only be a matter of time before 1.2950 in EUR/USD is broken. The reason why 1.2950 is significant is because if the EUR/USD closes below this point, there is no major support for the pair until 1.28”

Given the busy economic schedule out due out this week, it’s hard to imagine the pair being able to hold onto the 1.2950 should US data continue to come in above estimates. Furthermore, ECB officials seem set on continuing to chime in with dovish rhetoric at any given moment which is also a bearish factor.

According to analysts on the Ace Trader Team, “Earlier in European morning, the single currency was pressured due to the comments from ECB's policy maker Visco (Bank of Italy governor) as he said 'If the economy needs further help, ECB may cut deposit rate to negative territory; personally think cutting deposit rate would be effective; there may be unintended consequences to negative deposit rates, but we know how to work on that.”

From at technical perspective, the pair remains range bound and market participants should keep an eye on the 1.2950 support level in coming sessions. A break and close below here would most likely open up the doors to further selling down near the 1.2875 level (support trend line on weekly chart). Initial resistance sits at 1.3025 (reversal candles on 30min chart), followed by 1.3057 (the 9dma). On a final note, short term moving averages are now in bearish set up with price below both the 9 and 20dma’s, while the RSI (14) remains in neutral set up.

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