The euro currency closed on Friday, down 0.84%. The declines came following the corrective rally which started on 31st March this year. Price rose an impressive 3.5% from the March 31st close.
However, following this correction, there is early evidence of the onset of a decline. The EURUSD has formed a reversal pattern last week, just above the 1.2100 level. If there is a further continuation to the downside, we expect a decline back to the 1.1715 level.
For the moment, however, the common currency is likely to meet with the support near 1.1952. We expect some consolidation to take place here ahead of further declines in the coming months.
The price level of 1.1952 also marks the Fibonacci retracement level from the previous down leg through to the March 31 lows. Therefore, this level is an important one to watch out for.
To the upside, the major falling trendline should act as guidance. A strong close above this trendline could signal a continuation to the upside. This puts the next upside target for the euro at 1.2349.
The Stochastics oscillator on the daily chart is also showing the hidden bearish divergence in play. As a result, the immediate downside target in the EURUSD is the 1.1952 level. A close below this price could signal further declines down to the 1.1715 level next.
EURUSD – Economic outlook for the week ahead
Following last week’s high-ticket items, the week ahead looks somewhat calmer in comparison. The Fed Chair Jerome Powell is due to speak during the week which could add to the volatility. The ISM manufacturing and services PMI takes the stage early on in the week.
Underlying data is also showing evidence of a strong economic rebound. Therefore, the main headline items are likely to keep pressure on the euro to the downside.
But overall, the week looks calm with second-tier data such as industrial production coming out.
ECB President Lagarde is also due to speak on Friday. Investors could be tuning in to the speech in anticipation of any big changes from the ECB at the June meeting. The speech comes ahead of the ECB economic bulletin
Elsewhere, data from the US covers the weekly unemployment claims and the non-farm productivity data, and unit labor costs.