The US data released Friday disappointed and facilitated a bullish move which brought the pair north of 1.3900 and stopped a previous drop. The Euro bulls showed that uptrend resumption may still be possible and that support is still holding.
As we can see on the chart above, the pair found good support in close vicinity of the hourly 200 EMA and is now struggling to break 1.3915 to the upside. A bounce lower will most likely make 1.3830 the first target of the pair while a break of resistance will open the door for a touch of the high located at 1.3966. Lately, price movement lacked clear direction, sharp reversals occurred and it seems like indecision rules the market so today’s economic data may be the decisive factor for the pair’s short term direction.
The Euro Zone Consumer Price Index which is the main gauge of inflation is scheduled for release today at 10:00 am GMT with no change anticipated from the current 0.8%. Inflation is a major concern and the ECB tries to maintain it between certain thresholds (0 and 2 percent) by adjusting the Interest Rate. Higher readings for the CPI usually strengthen the Euro, suggesting that ECB may act to raise the Interest Rate in the future and the opposite is true for a lower value.
The US Industrial Production comes out later in the day, at 1:15 pm GMT. The indicator tracks changes in the total output produced by US industries and higher than estimated values are indicative of increased economic activity and thus, beneficial for the US Dollar. The expected value is 0.2%, a hefty increase from the previous -0.3%.
The pair had a slow trading session Friday and spent almost the entire part of the day between 1.6600 support and 1.6640 resistance, with a bullish bias generated by weak US data.
The confluence zone created at 1.6600 by the 200 Exponential Moving Average and horizontal support is rejecting price higher so far but we saw another attempt to break this zone to the down side, a thing that suggests that bearish pressure is growing. A break of important support or resistance almost always triggers a strong move, especially if price traded close to the zone for an extended period like in our case. Although the ranging period will not be over until 1.6600 or 1.6750 is broken decisively, we slightly favor the short side but our overall bias on the pair is neutral.
The Pound has a calm day ahead and no major announcements are scheduled. Price action will be influenced by the US release and by the technical aspect of the market.