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EURUSD Reaching Triangle Apex in Early Trade

by on February 26, 2014 8:18 am GMT
 

EURUSD is holding gains after yesterday’s report of the US consumer confidence gauge came in lower than expected at 78.1, lower than the 80.2 analysts forecasted. Last month’s figures were revised down from 80.7 to 79.4, so the market is watching important economic data erode out of the United States, which was supposed to lead the global growth for advanced economies.

Germany’s gross domestic product print came inline of expectations at .4 percent yesterday, and, this morning, the GfK German Consumer Climate rose higher than expected, coming in at 8.5 versus 8.3 estimate.

The weak economy in the US is helping the EURUSD stay elevated above 1.3700, and price action has been kept close within a small range between 1.3715 and 1.3765 ever since breaking through 1.3700 on February 14.
The 4H chart is presenting a triangle pattern with price action consolidating to the apex. The 20 EMA is aiding to the price action support of 1.3740. However, price was rejected strongly from the resistance trend line and resulted in a large bearish pin bar. The subsequent candles show a weakening trend.
If price action breaks through current support, secondary support will be where price action and the ascending trend line meet at 1.3725. A close beyond these levels could send the EURUSD down to 1.3690/95 intraday. A bearish crossover in the +/- DMI could facilitate further downside.
Conversely, a pullback could send the EURUSD to test 1.3750 prior to attempting to retest the descending resistance trend line. If possible, the EURUSD will likely see a shot to 1.38 were strong resistance lies.
4H Chart of EURUSD

4H Chart of EURUSD

The US will report new home sales, which will likely be weak due to the weather. A positive, or negative, number is likely to not fade the current risk sentiment and be bullish for the euro. Keep an eye on how the dollar trades to determine potential moves in the pair.