Euro Inverse HS vs. EURGBP Cross Rising Wedge

The Euro Zone economic sentiment data on top of its negative confidence prompted the EURUSD to sustain a drop from its previous high of 1.4548 and currently at the 1.4395 as of this writing. This has provided the US dollar index a new lifeline at the start of the trading week and the end of the month. The key support range of the US dollar index from 73.40-73.85 has been quite resilient for the past weeks. However, on the upside the 74.40-75.10 is what needs to be watched, as this is the average trading range for the few past weeks.

As analyst and traders are waiting for some clues as to where the direction of the market would be from the FOMC, US Consumer confidence, the upcoming report from the NFP and the Euro Zone's Producer Price index within this week. These reports would probably be able to provide a firmer indicator that would break the market's trading range for most majors pairs. Although, volatility still remains high at present; as wider price fluctuations prevail before the actual directional trend would re-emerge at the closing of the week. Daily price changes can be confusing as it stalls after each move and changes direction within two to three days thereafter.

On the technical perspective, an initial price break on the upside for the Euro would normally meet a pullback as it builds volumes for fresh postions upon the entry of the new month. These would enable position adjustments towards the closing of each month. Other traders would  view it as a false signal / breakout but true to its form the overall techncial formation of an inverse head & shoulders formation is very much in place. A typical bull trap where sellers would emerge during the same reaction on a daily basis. Meanwhile, the GBPUSD maintains its form and a sustaining weekly volume exists as prices continue to accelerate in a much slower pace like the Euro. This supports the intermediate upside trend for the EURGBP cross rate within a Directional Trend lower as a rising wedge is being formed on a weekly basis. The price extensions for the cross to retain this formation should not be higher than the 0.8865/85 levels for the closing week. Once this occurs and moves lower; the GBPUSD would gain momentum to move higher contrary to a Euro being steady to lower on a day to day basis. However, the inverse H&S formation for the Euro would only be contradicted with a continuing lower prices towards the 1.4285 price levels. That means a move for the USDX higher above the 75.10/20 basis point; which may not occur for now.