EURUSD recently broke above its long-term descending trend line and reached a high of 1.1350 before pulling back. Applying the Fib tool on the latest swing low and high shows where buyers might be waiting.
Price is currently testing the 61.8% Fibonacci retracement level that lines up with the 200 SMA dynamic inflection point. This could be enough to keep losses in check as it lines up with a former resistance level. If so, price could resume the climb to the swing high and beyond.
The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, the uptrend is more likely to gain traction than to reverse.
At the same time, RSI is already indicating oversold conditions or exhaustion among sellers. The oscillator is also starting to turn higher to show that bullish pressure might return from here. Stochastic has already reached the oversold region as well, possibly showing that buyers might take over soon.
The FOMC statement is coming up this week and could provide a lot of volatility for dollar pairs. No actual policy changes are expected for the time being but traders are wary of a potential shift in rhetoric to signal a possible cut within the year. If so, risk appetite could kick in and lift the euro versus the dollar.
However, the euro also has its PMI readings to contend with and another round of disappointing results could also stoke ECB easing expectations. Analysts are predicting small improvements in the services sectors of Germany and France, along with an uptick for the French manufacturing PMI.
Another factor that could keep a lid on euro gains is ongoing Brexit uncertainty as the UK is waiting on its next Prime Minister and the odds of a “no deal” exit.