The euro was hit early morning today by disappointing German Retail Sales data
The euro-dollar is contracting between 1.0605 and 1.0570, showing signs of indecision and choppy movement. Friday the pair exhibited bearish price action despite the lack of major news announcements, but a new low was not printed so the downtrend is wavering.
EURUSD bearish price action
The euro was hit early morning today by disappointing German Retail Sales data that showed a -0.4% change (anticipated 0.3%) so we are likely to see further downside throughout the day. Later today, Germany will release the Consumer Price Index which is the main inflation gauge so the pair will likely be affected by the numbers posted.
From a technical standpoint we favour the downside but the pair will probably retrace higher before taking another nose dive. The move up will have to find resistance and to show rejection around it. The first potential zone of resistance is the 50 period Exponential Moving Average (blue line) and the level at 1.0605, followed by the 100 period Exponential Moving Average (red line).
How we trade
We favour end of day Puts taken when price hits one of these resistances and shows rejection (long wicks) but the aggressive trader could use Calls (with a shorter expiry), aiming for one of the resistance zones we mentioned.
A break of both bullish trend lines seen on price and on the Relative Strength Index (RSI 14), together with a break of 1.0570 support, would call for further downside, even if a retracement higher doesn’t occur first.
Keep an eye on the German CPI released at 13:00 GMT (higher numbers strengthen the euro and lower numbers weaken it).