The euro has gradually but steadily descended to test the support level of 1.1715. Price action has since then posted a rebound following a spinning bottom candlestick pattern last week.
This rebound comes even as the Stochastics oscillator remains strongly in the oversold level. While the overall expectation is for price to bounce higher, we expect to see some consolidation taking place at the current levels.
There is scope for price action to whipsaw only to fall back into the support area of 1.1715 – 1.1600.
Still, EURUSD is looking ripe for a pullback. This could mean that a retracement back to the 1.1952 level is still on the cards. Retesting this level could confirm a move back to the 1.1715 – 1.1600 regions.
On the 4-hour chart time frame, we see a strong hidden bearish divergence forming. This is likely to push the EURUSD lower once again. But the declines could be limited in scope. If there is a modestly higher low forming, then it would give the cue toward an upside breakout to 1.1952.
Alternatively, look for a possible bearish divergence as the EURUSD might slip past the 1.1715 level of support. This will also give further validation to the anticipated move to the upside.
Economic data – week ahead
On the economic front, the week ahead will see fresh US data coming out. Following last week’s strong ISM manufacturing figures, the non-manufacturing PMI data will be in focus. This is expected to come out on Monday.
Following this, the Fed meeting minutes are due, followed by the Fed Chairman Jerome Powell speaking as well.
Data from the Eurozone is rather quiet with only the German industrial production figures due over the week. As a result, we could expect the lack of a strong economic calendar line-up to add to the consolidation in EURUSD at the current levels.