EUR/USD: Rally paused ahead of German jobs and Eurozone inflation data

EUR/USD created a doji candle yesterday, pausing the rally from the recent lows below 1.1250. As a result, today's close is pivotal.
The pair could revisit the key resistance of 1.1407 if the German employment and Eurozone CPI numbers better estimates.

Omkar Godbole FXStreet Contributor

EUR/USD created a doji candle with long upper shadow on Thursday, signaling strong indecision in the market place.

The common currency picked up a bid in Europe and jumped to a high of 1.1420, as the German 10-year bond yield hit three-week highs near 20 basis points, after the Eurozone’s biggest economy suggested a pick up in inflation.

The move above 1.14, however, was short-lived with the dollar rising across the board after the US fourth-quarter annualized GDP came in at 2.6 percent, beating the consensus estimate of 1.9 percent by a big margin.

The dollar demand pushed EUR/USD all the way back to its opening rate of 1.1370.

The flat close with a long upper shadow has weakened the immediate bullish case. After all, that was the third straight failure to beat the 1.1407 (61.8 percent Fibonacci retracement of 1.1514/1.1234).

That said, the 5- and 10-day moving averages (MAs) are still trending north, indicating a bullish setup. Further, the rising wedge breakdown on the 10-year US-German yield spread, confirmed earlier this week, is still valid

So, a re-test of 1.1407 cannot be ruled out, especially if the German jobs data, due at 08:55 GMT and the Eurozone preliminary CPI number, scheduled for release at 10:00 GMT, beat estimates by a big margin.

The bullish case, however, would strengthen only if the pair closes today above 1.1407. The breakout will likely elusive if the US personal spending, due at 13:30 GMT, betters estimates, lifting treasury yields higher.

On the downside, traders need to keep an eye on 1.1359 (low of yesterday's doji). A close below that level would imply an end of the rally from the Feb. 15 low of 1.1234. As of writing, EUR/USD is trading largely unchanged on the day at 1.1370.

EUR/USD Technical Levels

1. R3 1.1473
2. R2 1.1447
3. R1 1.141
PP 1.1385
1. S1 1.1348
2. S2 1.1322
3. S3 1.1286

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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