EUR/USD: range-bound trade
On Tuesday EUR/USD attempted to rally, but was capped by the $1.3100 resistance (50% Fibo from the June decline). The pair spiked down to $1.3050 on a weaker-than-expected German Zew economic sentiment index (36.3 vs. forecasted 39.8). Meanwhile, euro zone economic sentiment improved to 32.8 (forecast: 31.8).
As can be seen from the 4-hour chart, the $1.3100 level is acting as a strong resistance. Meanwhile, the downside is limited by the $1.3000 handle: both on Friday and Monday bears tried to push the pair lower, but closed the day above $1.3050. A daily close above $1.3100 would be a bullish sign and would open the way to the $1.3200 area. However, a close below $1.3000 would open the way for a further decline.
The week is expected to be quite interesting for EUR/USD traders. The main risk event of the week will be the Fed’s Ben Bernanke testimony on Wednesday. Market wants to get a clearer answer on the QE tapering question: the recent US comments were quite contradictive. Confirmation of a “dovish stance” could push EUR/USD higher.
Chart. H4 EUR/USD