EURUSD recently broke past the neckline of a complex inverse head and shoulders pattern visible on the 4-hour time frame.

Price looks ready for a retest of the broken resistance around 1.1800-1.1850. 

This lines up with the 50% to 61.8% levels, which might keep losses in check and allow more buyers to join in the rally. The 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside, but an upward crossover appears to be brewing to draw more bulls in. 

Stochastic is heading down from the overbought level to signal that sellers are in control of price action for now. However, the oscillator is moving close to oversold levels and turning back up could reflect a return in bullish momentum. 

The dollar has been able to regain some ground against its peers when US President Trump stoked confidence in tax reform progress ahead of the Senate vote that might happen as early as Thursday this week. This could revive hopes that tax cuts could be implemented before the end of the year, which would be positive for businesses and overall economic performance. 

Data from the US has also been stronger than expected as new home sales rose from 645K to 685K versus expectations at 627K. The dollar dipped slightly on Kashkari’s remarks but managed to recover when incoming Fed head Powell’s speech indicated decisiveness to act in order to contain economic risks.

Meanwhile, the euro has managed to shrug off previous political jitters from Germany as signs point to a coalition being formed. Data from the region has also been mostly upbeat last week and traders are setting their sights on another pickup in inflation to be reported in the days ahead. 

By Kate Curtis from Trader’s Way