- EUR/USD looking for room to run, testing consolidation range.
- EU GDP coming up Wednesday.
EUR/USD is testing hard into resistance at 1.2295 and looks set for a bullish break if it can manage a convincing close over the current consolidation area.
The Euro/Dollar pair has consolidated with a bullish twist for the past few trading sessions following a retracement from the 1.2538 high posted two weeks ago, but this recent adjustment may have more to do with broader-market risk aversion than underlying fundamentals, as traders balk at the prospect of rising interest rates in the near future as inflation begins to return in a meaningful way for the first time in a decade. Recent pullbacks across global markets has seen a increase in positive sentiment for both the US Dollar and the Japanese Yen, as equities tumble off their record highs and bond yields spike to multi-year highs, most notably the US 10-year Treasury, which approached the key 3% yield rate in rapid order as markets shook awake to the prospect of rising interest rates plugging the flow of easy money granted by a decade of easy money access from loose monetary policies from all of the major central banks around the world.
The Eurozone has a hefty trove of data dropping on markets this Wednesday, with German CPI numbers fixing at 07:00 GMT, along with German GDP and a talking point from German central bank President Weidmann at 08:00. The primary market mover, though, will be Eurozone GDP data at 10:00 the same day. Market forecasts are calling for a steady rate on quarter-over-quarter data of 0.6%, matching the previous, while year-on-year GDP is expected to show a mild uptick to 2.7%, up from the previous 2.6%. An upside beat to these numbers could give the Euro the confidence needed to break out of the recent zone and re-establish the long-standing bullish trend against the Greenback.
Intraday support/resistance rests at 1.2234 and 1.2335 respectively, while the recent pullback on daily candles may be pricing in a swing upwards after it touched support from the 50.0 Fibo level at 1.2220, which also coincides with the 34 EMA currently laying in the same area. If price continues to breakdown further, the way is clear for the pair to drop to 1.2070, unchallenged until the 200-day SMA currently sitting at 1.1719.