The euro currency is set for another volatile trading week against the US dollar this week, as traders try to make sense of weakening economic data from both the eurozone and the US.
Last week the US Dollar currency dropped after the Fed sounded less aggressive than anticipated towards rate hikes down the road. This sentiment shift could help the euro continue to recover.
The problem for the EURUSD pair is that the EU economy is stalling, and economic growth in the German economy is starting to slow. The German economy needs to be strong in order for the euro to rise.
German Retail Sales arrived at -8.8% YoY, while Germany’s Retail Sales dropped by -1.6% MoM in June versus 0.2% expected and 0.6% last, the official figures released by Destatis showed on Monday.
On an annualized basis, the bloc’s Retail Sales came in at -8.8% in June versus -8.0% expected and -3.6% booked in May. The good news is that the EURUSD brushed this news aside.
Something that could be a very positive right now is the bullish sentiment towards the EURUSD. Sentiment has changed recently, and this could help to aid the recovery in the single currency.
The ActivTrader Market Sentiment tool shows that some 62 percent of traders are bullish towards the EURUSD. This is the same as last week and could suggest more price gains.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has formed a large inverted bearish head and shoulders pattern has formed, which strongly suggests more upside.
According to the potential upside target, as measured by the size of the head and shoulders pattern, we could reasonably expect to see the EURUSD pair testing towards the 1.0600 level.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame a large head and shoulders pattern has been activated now after the price moved under 1.0600. This is the pattern to watch over the medium-term horizon.
Watch out for a further crash below parity, and possible the 0.9000 support level if we continue to see the EURUSD pair trading below 1.0600 level.