EURUSD: The 1.13 Level is Crucial for the Pair
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On Monday, the EURUSD pair declined below the previous swing lows of 1.13 and created new lows, which according to the technical analysis definition, confirmed the long-term downward trend and set the 1.10 level as the new target for bears. Again, according to technical analysis theory, the next rally might be found at 1.13 as the 1.13 support has now turned into a resistance.
However, the pair rose back above the 1.13 level, closed the week at 1.1414 and therefore canceled the immediate bearish momentum, with what seems to be only a bearish trap and a false breakdown to new lows. So what is going to happen now?
Another resistance is at the bearish trend line near 1.1360 and as the Euro rose above this line, the bullish scenario could be confirmed, targeting 1.1435 again. On the other hand, should the pair decline back below the 1.13 level, bears might still be stronger, targeting the mentioned 1.10 level.
On Wednesday, the German GDP slowed sharply for the third quarter and came out at 1.1 percent year-on-year, down from 2.3 percent in the second quarter. The quarterly change is now negative at -0.2 percent (from 0.5 percent previously) and if the fourth quarter ends below zero, the biggest economy in the eurozone will effectively enter into a recession.
Moreover, the eurozone GDP stayed at 1.7 percent on the yearly basis in the third quarter, while the q-o-q print remained at 0.2 percent.
Fundamentally it appears that the Euro may weaken further as the spread between US and EU GDP growth is huge, favoring the greenback against the single currency.
Therefore, the battle for the 1.13 level could start again and this zone could be a major milestone for traders as staying above still gives hope for a return toward the 1.15 mark, but trading below is a signal for another leg lower.
Disclaimer:
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This article was originally posted on FX Empire