EUR/USD Forecast: Narrowing wedge ahead of Merkel-Macron meeting

The EUR/USD is trading around $1.2370, down from the high of $1.2400 and closer to the low of $1.2360. The latest figure to come out of the euro-zone was a positive surprise for a change. The Current Account came out at €35.1 billion in February, better than €32.3 billion expected and with an upward revision to January. However, this third-tier figure has not managed to rock the boat for the world's most popular currency pair.

More significant figures earlier in the week were more worrying. The plunge of the German ZEW Economic Sentiment to -8.2 points (reflecting pessimism) and the downward revision in March inflation figures to 1.3% YoY caused some ECB officials to worry. If we hear an acknowledgment of the slowdown from ECB President Mario Draghi, that would likely have a bigger effect.

The lack of movement in the pair goes hand in hand with a potential lack of reform. French President Emmanuel Macron will try to push forward reforms in his meeting with German Chancellor Angela Merkel. later in the day. However, reports from Berlin suggest that she is reluctant to cede too much ground given opposition within her party and from the opposition. 

In the US, President Donald Trump and his Japanese Prime Minister Shinzo Abe did not find common ground on trade. Trump wants bilateral deals while Japan insists on the multilateral Trans-Pacific Partnership that Trump had abandoned. Trade tensions are creeping up once again after a hiatus early in the month. If these tensions persist, it could result in higher inflation. worldwide.

Later today, the US publishes the weekly Unemployment Claims which are expected to tick down from 233,000 to 230,000. The Philly Fed Manufacturing Index is projected to drop from 22.3 to 20.1 points. As these are second-tier indicators, further movement in the pair is more likely from sentiment.

EUR/USD Technical Analysis - Wedge bound

The pair enjoys a few positive gauges, but none is outstandingly strong. The RSI is above 50, Momentum is positive and the pair holds above the 50-day Simple Moving Average. Nevertheless, it is not going anywhere fast.

The pair is trading in a narrowing triangle or wedge. Downtrend resistance begins from the 3-year high of $1.2555 seen in February and runs through the late-March high of $1.2480. The pair is now closer to this line. Uptrend support begins from the February low of $1.2155 and continues with the April low of $1.2210. 

In the close vicinity, resistance is found at the daily high and the round number of $1.2400, followed by $1.2413. Support is at $1.2345, a recent high in March and also $1.2330, where the 50-day SMA appears.

More: EUR/USD has a lot of support on the way down and one critical resistance level — Confluence Detector