EUR/USD: Conflicting signals ahead of EZ GDP and US retail sales

  • Lack of clear bias, conflicting signals on the EUR/USD daily chart.
  • Data-heavy day ahead, focus on US-German yield spread.

The EUR/USD created an inverted bearish hammer yesterday, despite ECB Villeroy's hawkish rant.

The candlestick pattern indicates the corrective rally from the recent low of 1.1822 has run out of steam at 1.1996. It also adds credence to the 50-day moving average (MA) and 100-day MA crossover.

However, the 5-day MA and the 10-day MA is beginning to trend north in favor of the bulls. The 14-day relative strength index (RSI) is rising from the oversold territory. Clearly, the pair lacks clear bias, as indicated by conflicting technical signals.

However, the first tier data releases scheduled for releases on both sides of the Atlantic could set the tone for the next move in the EUR/USD.

Note, the USD rally has already come to a halt as last week's dismal US inflation reading stalled the rise in the 10-year US-German yield spread. As of writing, the spread stands at 238 basis points vs. a recent high of 245 basis points.

The spread will likely drop further in the EUR-positive manner if the German ZEW survey and the Eurozone Q1 GDP paint a positive picture of the economic activity and the US retail sales miss estimates. In such a case, the EUR/USD will likely find acceptance above 1.20.

On the other hand, strong US data and a weak Eurozone/German data could yield another leg lower in the EUR/USD pair.

EUR/USD Technical Levels

Key resistance: 1.1937 (61.8% Fib R of Nov-Feb rally), 1.20 (psychological level), 1.2020 (200-day MA).

Key support: 1.1915 (Jan. 9 low), 1.1822 (May 9 low), 1.1790 (76.4% Fib R of Nov-Feb rally).

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bullish Neutral Shrinking
1H Bearish Oversold Shrinking
4H Bearish Neutral Low
1D Bearish Neutral Expanding
1W Bearish Neutral Low

 

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