The euro currency is trapped in limbo above the 1.1900 level against the US dollar at the start of the week as traders remain undecided towards the pair over both the short and long-term horizon.
Last week the EURUSD bounced sharply from critical trendline support around the 1.1850 level, with bulls managing to briefly advance the pair towards the 1.1970 area. However, bulls were unable to recover the EURUSD above its key 200-day moving average.
This week could be critical for the EURUSD pair, especially as the pair ranges between the 1.1900 to 1.2000 price range. Once we see a breakout from this range it is possible the next big move in the EURUSD pair is going to take place.
Potentially catalysts for the next big move in the EURUSD pair this week are likely to be the ISM manufacturing report, German retail sales, and the June Non-farm Payrolls job report.
It should be noted that the US infrastructure spending bill could also play a role in the next big move in the EURUSD. If the bill is signed into law this week I believe it is likely to be a positive for the EURUSD.
The ActivTrader market sentiment tool shows that bullish sentiment is dropping, with 53 percent of traders expecting further EURUSD gains. This is notable drop in sentiment, as some 64 percent of traders were bullish towards the EURUSD last week.
Neutral sentiment reading tends to suggest range bound trading conditions in the EURUSD pair will continue. Once we see a clear sentiment bias take place it may be time to fade what the herd are doing.
EURUSD Short-Term Technical Analysis
The EURUSD pair has a formed a notable inverted head and shoulders pattern which has been activated since the middle of last week. The size of pattern implies that a rally towards the 1.2000 level could be on the horizon.
If we see the EURUSD pair drop under the 1.1850 level this week a drop towards the 1.1700 area is very likely to happen. My current bias is for a test towards the 1.2000 level to happen this week.
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EURUSD Medium-Term Technical Analysis
The daily time frame shows that the EURUSD pair bounced from key rising trendline support last week. This effectively stopped a technical meltdown towards the 1.1700 area.
This week bulls need to stage multiple daily price closes above the EURUSD pairs 200-day moving average, around the 1.2000 level. Overall, watch for a major directional move once the 1.1850 to 1.2000 price range happens.
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