EURUSD appears to be pulling back from its latest rally as price could correct to the ascending trend line or Fib levels on the daily time frame.

The 50% retracement level is closest to the trend line around the 1.2150 minor psychological mark.

The 100 SMA is above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. This suggests that the rally is more likely to continue than to reverse. Also, the shorter-term SMA is close to the ascending trend line to add to its strength as support.

However, the gap between the moving averages is narrowing to reflect weaker bullish momentum. Stochastic is also on the move down so sellers might have the upper hand for now, and buying pressure would return once the oscillator indicates oversold conditions.

The US dollar rebounded against most of its counterparts in recent sessions but analysts have doubts that it can hold on to its winnings. Data has been weaker than expected and FOMC officials have warned of the dangers of low inflation.

Meanwhile, the euro could draw support from news of a German coalition. Although full details are yet to be revealed, Merkel’s CDU party and CSU allies were able to strike a deal with the SPD.

Apart from that, euro zone data has been mostly upbeat. German industrial production and French trade balance beat expectations then the German trade balance and ECB economic bulletin are lined up next. Only initial jobless claims and mortgage delinquencies are due from the US today.

By Kate Curtis from Trader’s Way