EUR/USD Price Analysis: Trading close to trend line resistance
With many upside barriers, EUR/USD may struggle to the upside. Will the German Zew survey this morning be the catalyst for lower EUR/USD?
Market highlights from the last week
Tuesday May 12: There were no major Euro-zone developments during Tuesday with markets continuing to monitor developments surrounding the ECB and German Constitutional Court
Wednesday May 13: ECB vice-president de Guindos stated that the economy has hit the bottom in terms of contraction, but that it would take two years to recover fully
Thursday May 14: In comments on Thursday, President Trump stated that it is a great time to have a strong dollar, in contrast to his stance last year that a strong US currency was damaging
Friday May 15: German GDP contracted 2.2 per cent for the first quarter of 2020 which was in line with expectations with the year-on-year decline at 1.9 per cent from +0.2 per cent previously. The flash Euro-zone first-quarter reading was confirmed at a contraction of 3.8 per cent with a year-on-year decline of 3.2 per cent.
Monday May 19: Euro-zone sentiment strengthened sharply late in the European session following proposals by Germany and France for a €500bn (£448bn, $546.7bn) coronavirus reconstruction plan
EUR/USD Price Analysis
Let us have a look at the technical viewpoint.
Monthly: All the trading was confined to lower half of the March range, highlighting the lack of upside momentum
Weekly: Mixed trading for the last six weeks. Inside Bars posted highlighting the lack of clear direction
Daily: Holding within a bearish channel formation. Trend line resistance is located at 1.0957
Intraday 4-hour: Offers a Fibonacci confluence between 1.0964 and 1.0976. This is a 78.6 per cent pullback from 1.1018-1.0766 and a 161.8 per cent extension from 1.0766-1.0897.
Outlook: Although there is no clear indication of a change of trend, with many upside barriers, EUR/USD may struggle to the upside. Will the German Zew survey this morning be the catalyst for lower EUR/USD?
Possible trade setup
Action: Selling at 1.0950 (inside trend line resistance)
Stop: 1.0990 (above the confluence zone)
Targets: 1.0720 and 1.0625 (channel base)
Potential return on risk to first target: R5.75 (reward 230 / risk 40)
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