EUR/USD analysis: bouncing within range, bearish below 1.2160

Valeria Bednarik FXStreet

EUR/USD Current price: 1.2087

US data failed to impress, putting dollar's rally in pause.
Low volumes expected for Tuesday, with most of the world celebrating Labour Day.

A holiday in China and Japan kept majors ranging at the beginning of the day, but that wasn't enough to interrupt dollar's rally, as the American currency continued appreciating against all of its major rivals. The EUR/USD pair broke below the 1.2100 mark during London trading hours, with the decline exacerbated by poor inflation figures in Germany, as the EU harmonized CPI edged lower 0.1% in April, according to preliminary estimates, while advanced just 1.4% yearly basis, below the expected and previous 1.5%. US data was mixed, with no positive surprises to fuel USD rally in the American afternoon. Personal Spending rose 0.4% in March as expected, although income rose by 0.3%, slightly below market's expectations of 0.4%. Core PCE inflation in March came as expected, up 0.2% monthly basis and 1.9% from a year earlier, while on a down note, the Chicago PMI rose by less-than-expected in April, up 57.6, and Pending Home sales posted an unexpected slump of 4.4% in March.

Tuesday will be a strange day, as most of the world celebrates Labour day, but not the UK, neither the US, meaning that markets will be active worldwide, by a sharp decrease of volume is anyway expected. There won't be macroeconomic releases in the EU, but the US will release the final versions of the manufacturing PMI, both the Markit and the ISM ones.

The pair is still bearish, developing well below the 61.8% retracement of this year´s rally at 1.2160, the level to recover to see the downward pressure easing. In the 4 hours chart, the 20 SMA maintains a strong bearish slope, capping the upside now at 1.2125. Technical indicators in the mentioned chart have managed to bounce from oversold readings, but remain within negative territory, indicating that chances of a steeper recovery are limited. The pair will likely resume its downward move and test the 1.2000 threshold on a break below 1.2054, Friday's low and the immediate support.

Support levels: 1.2100 1.2060 1.2020

Resistance levels: 1.2125 1.2160 1.2200

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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