EUR/USD forecast: price correcting ahead of FOMC and PMI data
The EUR/USD is correcting some of its recent gains ahead of US and European data this week.
Key economic data to watch for the EUR/USD this week
In terms of US data this week, with the potential to be high impact catalysts for the EUR/USD currency pair: Wednesday (23 November 2022) evenings release of Federal Open Market Committee (FOMC) meeting minutes will be the most anticipated by traders.
Ahead of this data however, we do also have Federal Reserve members, Mester, George and Bullard with public addresses on Tuesday (22 November 2022) evening. Fed member Bullard has been known to be one of the more ‘hawkish’ voting committee members and will be one to monitor.
While perhaps offering less potential for volatility on the EUR/USD currency pair, although still of relevance, would be European (France and German in particular) flash manufacturing and services purchasing managers index (PMI) data out on Wednesday morning.
EUR/USD – What the indicators are suggesting?
The EUR/USD price has recently broken above the 200-day simple moving average (blue line), while trading firmly above the 50 day (green line) and 20 day (red line) simple moving averages (MAs) as well.
The 20MA is now trading above the 50MA further suggesting that the short to medium term trend bias is up.
The price having recently moved above the 200MA suggests the longer-term downtrend has been broken, although is not yet confirmed as up.
The stochastic oscillator has just crossed back out of overbought territory.
These indications currently suggest that we are seeing a correction or pullback from overbought territory and the recent move higher.
Our preferred approach in the current scenario is to wait for the pullback to end before looking for long entry into the EUR/USD currency pair, that is provided that the price pullback does not extend too far.
EUR/USD – price action analysis
The pullback from overbought territory on the EUR/USD pair see’s 1.0120 and 1.0080 as possible support targets from the move.
Traders looking for long entry might hope to see the current pullback end with a bullish candle pattern / price reversal, before reaching these support targets, in which case a move to retest recent highs at 1.0388 and 1.0480 is favoured. In this scenario, a close below the reversal low could be used as a stop loss indication for the trade.
Should the pullback not end with a bullish price reversal and instead move to break lower support at the 1.0080 level, the bullish assumptions would be assumed to have failed and we would again need to reassess our trend biases on the EUR/USD currency pair.
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