Friday the pair retraced higher but overall we had a slow trading session and the release of the Euro Zone Consumer Confidence which posted better-than-anticipated values did not do much to affect price behavior.
On a four hour chart we see that price bounced higher off the 200-period Exponential Moving Average which is in close vicinity to the minor support located at 1.3770. These two types of support (dynamic and static) create a confluence zone which is harder to break and may push price into 1.3830 for a re-test from below. Adding to this view is the oversold condition of the Stochastic oscillator which is another sign of higher moves, but lately the bears have been in control of the pair and we expect lower prices once this retracement is complete.
The German Manufacturing PMI is released today at 8:30 am GMT with an estimated value of 54.7 while the previous was 54.8. This is a survey of about 500 purchasing managers and the value is derived from their opinions regarding business conditions in the Manufacturing sector. Although a big change is not expected, higher values usually strengthen the Euro because the survey is considered a leading indicator of economic health. Later in the day, at 1:45 pm GMT the same indicator but for the US economy is released and anticipated to decrease from 57.1 to 56.6.
The pair experienced a slow day Friday and price was confined in a narrow range of less than 50 pips. The lack of major data releases most likely contributed to this type of movement.
The Stochastic oscillator is indicating an oversold condition of the market and this suggests that higher prices may follow, especially if 1.6480 is not broken today. On the other hand, price is comfortably trading below the 200-period Exponential Moving average (on a four hour chart) so the market can be considered bearish and we consider that another drop will follow after a move up is completed and the oversold condition of the Stochastic is cleared.
The United Kingdom didn’t schedule any economic data releases for today so probably market participants will pay more attention to the technical factors and to the US data release.