EUR/USD: Relief Rally Possible Ahead of Germany's Retail Sales

Summary:

EUR/USD is likely to have a relied rally before falling further. The formation of the right shouder will complete the head-and-should pattern.

EUR/USD is on track for a relief rally ahead of Monday’s economic events. Among the expected numbers is Germany’s retail sales. While Europe’s largest economy is still struggling with rising COVID-19 cases, its retails sales are expected to have surged by 3.0% MoM. The number is higher than February’s 1.2%. Besides, the country’s manufacturing PMI is expected to remain unchanged from March’s figure at 66.4.

Italy, France, and the larger Eurozone are also scheduled to release their manufacturing PMI in today’s session. EUR/USD will also be reacting to the US ISM manufacturing PMI. Analysts expect a reading of 65.0 compared to March’s 64.7.

EURUSD Technical Outlook

EUR/USD has eased into the new month after Friday’s decline. In the last session, the pair dropped from 1.2127 to 1.2017. At the time of writing, it was up by 0.02% at 1.2022 and an RSI of 35. On a 4-hour chart, it is trading above the 14 and 28-day exponential moving averages. Notably, the two-week EMA has crossed over the four-week one to the downside. As long as the pair remains above the 28-day EMA, the price will continue rising.

I expect EUR/USD to rise to around 1.2058 as part of its relief rallying. If that happens, the pair will have formed a right shoulder and completed the head-and-shoulder pattern. As you may have read in our free beginner articles, the pattern is usually a bearish reversal pattern. The pair is likely to trade sideways at the neckline (1.2058) before declining to 1.2000. Below that level, the next target will be at 1.1955. However, this trend will be invalidated by a move above 1.2100.