Forex Signals – Rising Wedge Pattern Signals Pullback
The pair can continue to fall if bears target the underside of the rising wedge pattern. Alternatively, it may continue to rise as it is supported by the two moving averages.
- Put a sell stop at 1.2220 and a take profit at 1.2162.
- Add a stop loss at 1.2270.
- Timeline: 1 day.
- Set a buy stop at 1.2270 and a take profit at 1.2300.
- Add a stop loss at 1.2220.
EUR / USD eased in the overnight session as investors pondered strong US home prices. The pair fell to 1.2235 after hitting its highest level since January this year.
US Home Sales Jump
On Tuesday, the EUR / USD pair jumped to its highest level since January after the relatively mixed economic data from Germany, the largest economy in the euro zone. Figures from the country’s statistics agency showed the economy contracted 1.8% in the first quarter, after rising 0.3% in the previous quarter. That decline resulted in a 3.4% year-over-year decrease as the country imposed lockdowns to contain the virus.
The pair then rose after positive German business expectations data. According to the ifo Institute, the country’s business climate rose from 96.6 in April to 99.2 in May. Similarly, business expectations and the current estimate rose to 95.7 and 102.9, respectively. These numbers are important because they are leading indicators of business spending, which is a significant contributor to a country’s GDP.
The EUR / USD then erased those gains after the relatively strong US home price data. Property prices rose 13.2% in March from their highest level since 2005, according to the CoreLogic Case-Shiller Index, an improvement over the previous month’s 12% increase. This growth is mainly due to the persistently low interest rates that have encouraged people to buy homes. This is also due to the ongoing trend among home buyers to move from apartments to suburban homes.
On the negative side, Conference Board data showed consumer confidence fell from 117.5 to 117.2. This trend was due to the fact that many people were less optimistic about future employment prospects. Additionally, new home sales were down 5.9% in March. Later today, EUR / USD will react to the latest US mortgage index data.
EUR / USD technical forecast
The four hour chart shows that the pair rose to its highest level since January yesterday and then erased some of those gains. It did so when price was testing the top of the rising wedge pattern. The pair also fell below key support at 1.2242, which was the highest point so far this year. It’s also slightly above the 25-day and 15-day moving averages. Hence there are two possible scenarios for the future. The pair can continue to fall if bears target the underside of the rising wedge pattern. Alternatively, it may continue to rise as it is supported by the two moving averages.