EURUSD is moving inside a rising channel on its 1-hour forex chart, with price just finding resistance at the top of the range. 

Stochastic is moving lower, indicating that sellers are in control of price action for now. MACD is also heading down, which confirms the bearish momentum.

With that, EURUSD could make its way back to the bottom of the channel, which lines up with the 1.2450-1.2500 area and the simple moving averages. The 100 SMA just crossed above the longer-term 200 SMA, indicating that an uptrend is starting.

Another bounce off channel support or the SMAs could lead to a test of channel resistance around the 1.2600-1.2625 levels. Strong buying pressure might even lead to an upside break of resistance.

Event risks for this trade include the release of PMI readings from France and Germany, which could set the tone for euro movement for the rest of the week. Strong figures could lead to more gains for the shared currency, as these might convince traders that the region could avoid recession.

In the US, CPI figures are due and these could indicate whether or not the Fed has to be worried about price pressures. Strong data could remind traders that the US central bank is on track to tighten policy next year and possibly renew dollar demand.

By Kate Curtis from Trader’s Way