Euro Continues to Hold Below Key Resistance
A rally attempt on Monday was short-lived but likely took out stops from weak hands positioned short during Fed Chair Powell’s speech on Friday. The pair continues to consolidate below its 20-day moving average, ahead of the ECB meeting on Thursday that is likely to move the markets.
The economic calendar is quite light on Tuesday in terms of data that stands to have a strong influence on EUR/USD. Industrial production figures out of France and Italy both came in softer than expected although failed to have much of an impact on the exchange rate.
From the looks of the economic calendar, volatility is likely to be at its highest this week on Thursday. Not only does the ECB meet, but the latest inflation figures from the US will also be released. Analysts are expecting the consumer price index to come in a bit softer in August compared to July.
I suspect market participants are waiting until Thursday to put on any meaningful positions. For that reason, it seems EUR/USD might continue to trade within a tight range in the session ahead.
The dollar is catching a bit of a bid in early trading and this could put some pressure on EUR/USD in the session ahead. This might suggest a dip to retest the bottom of the range.
Currently, the pair appears to be ranging between 1.1020 and 1.1060. The latter was tested at the European open and the pair was last seen around the mid-point of the range.
In the event of a downside break, the next area of interest comes in at 1.0979. To the upside, as mentioned, the 20-day moving average has been blocking rallies. The indicator has declined towards the 1.1060 level to offer a confluence of resistance.
I continue to view this area in EUR/USD as a critical inflection point. It was this in around the 1.1050 area that kept the exchange rate support through most of August. Typically, strong areas of support tend to offer a wall of resistance once broken.
- EUR/USD remains range bound, volatility is likely to pick up on Thursday.
- Range support falls at 1.1020 and resistance at 1.1060.
This article was originally posted on FX Empire
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