The euro/U.S. dollar (EUR/USD) currency pair has arrived at a critical technical juncture ahead of this week’s key fundamental events, which include among other things the Eurozone PMIs (tomorrow), German Ifo (Thursday), U.S. GDP and the Jackson Hole Symposium (Friday).
As can be seen from the daily chart, below, the bears have been managing to just about cling onto resistance in the 1.1320-65 area. As well as the underside of the broken trend line, the 61.8% Fibonacci retracement level from the last swing high meets the point of origin of the breakdown on June 24, in this region.
Therefore, a potential break above this zone, if seen, can be a rather bullish outcome, which could then lead to another push towards the long-term resistance area between 1.1425 and 1.1500 (the previous rallies have failed to hold above this area) or higher.
But if the EUR/USD turns back lower from this 1.1320-65 region then the first key level of potential support to watch is at 1.1230, below which there is nothing significant until the 50 and 200 day moving averages at around 1.1145 and 1.1100, respectively. The next key support below these moving averages is at 1.1045 where the previous low meets a bullish trend line.
Conservative traders may therefore wish to wait for the EUR/USD to make its next move before potentially trading in the direction of the breakout.