Despite its recent sharp selloff, EURUSD is still on an uptrend on its longer-term time frames. 

The pair is moving inside a rising channel on its 4-hour chart and may be ready to test the channel support at the 1.1000 major psychological level.

Stochastic is already indicating oversold conditions and is turning higher, suggesting that euro bulls are ready to come back. RSI is also turning higher even though it hasn’t reached the oversold area yet. Price could make an early bounce off the current levels and head back to the resistance around the 1.1600 handle.

Note that the 100 SMA made an upward crossover from the 200 SMA, confirming that the path of least resistance is to the upside. However, if a larger pullback takes place, EURUSD might still have a chance at testing the actual channel support. A breakdown below 1.1000 might indicate that a reversal is underway.

The US printed a stronger than expected preliminary GDP reading for Q2 2015, reflecting an upgrade from 2.3% to 3.7% and outpacing the consensus at 3.2%. Initial jobless claims was slightly lower than expected at 271K versus the projected 275K figure.

Event risks for this trade setup today include the preliminary CPI readings from Germany and Spain. This might reflect the recent downturn in commodity prices, with both economies slated to show 0.1% declines. Weaker than expected data could bring talks of deflation back on the table, which might spur more euro weakness.

In the US, the core PCE price index or the Fed’s preferred inflation measure is lined up for release. The report could show a 0.1% uptick in price levels, same as in the previous month. Both personal spending and income are expected to show 0.4% gains while the UoM consumer sentiment index might see an upgrade from 92.9 to 93.2, reflecting stronger optimism.

By Kate Curtis from Trader’s Way