EUR/USD: Stuck at 50% Fib, focus on German Industrial Production
- EUR/USD's bounce from recent lows seems to have stalled near key Fib level of 1.1219.
- Signs of indecision have emerged on EUR/USD's daily chart.
- An above-forecast German data is needed to push the pair above Tuesday's high.
EUR/USD failed to close above 1.1219 (50% Fibonacci retracement of 1.1412/1.1027) on Tuesday and is currently trading just below that key level.
The common currency picked up a strong bid earlier this week as markets began pricing the prospects of aggressive easing by the US Federal Reserve (Fed) over the next few months, courtesy of escalating trade tensions between the US and China.
The pair rose 0.87% on Monday to 1.1213 and extended gains further to1.1250 yesterday. However, the break above the key Fibonacci level of 1.1219 was short-lived and the pair ended up creating a candle with long upper and lower shadows with a small body, a sign of indecisive market.
So, today's close is pivotal. Acceptance above 1.1250 (Tuesday's high) would signal a continuation of the rally from the Aug. 1 low of 1.1027. A daily close below 1.1167 (Tuesday's low) would confirm an end of the bounce from 1.1027.
Focus on German data
The data due at 06:00 GMT is expected to show the German Industrial Production fell 1.8% year-on-year in June. German Factory Orders jumped 2.5% in June, according to data released on Tuesday. So, an above-forecast industrial production cannot be ruled out. That will likely put a strong bid under the EUR, helping the pair rise above Tuesday's high of 1.1250.
The EUR/USD pair, however, could fall back under Tuesday's low of 1.1167 if the German data prints well below estimates, bolstering the dovish European Central Bank (ECB) expectations.
Apart from the German data, the common currency could also take cues from European Central Bank member Benoit Coeuré's speech scheduled at 07:30 GMT. The policymaker has little room to sound hawkish, given the recent economic slowdown and rate cuts by central banks across the globe.
The Reserve Bank of New Zealand cut rates by 50 basis points to 1.00% earlier today and signaled readiness to cut rates to the negative territory if required. The market was priced in for a 25 basis point rate cut.
Technical levels