EURUSD:Directionless Volatility and the Triangle Pattern

Dec 9, 2018

Markets left another directionless volatility week behind.EURUSD has been unable to find a clear direction, trapped between a more dovish Fed and slowing growth and political turmoil in the EU. 

US- China trade war optimism and more dovish comments from FED members send the pair 1.14200 hurdle. However, the weather is not sunny in Europe. Brexit uncertainty, Italy budget concerns, weak macroeconomic figures....Investors are not "knocking on Euro's door."

Looking at the fundamentals,  shrinking yield curve could be worrisome, but the US is a few steps ahead of the EU, both in monetary policy and economic growth. 

On the US side, prices fell as the headline payrolls print missed forecasts but swiftly recovered as traders digested a steady jobless rate and wage growth matching a nine-year high.Among the others,wage growth figures were quite promising.

US Inflation data may help revive rate hike expectations
Upcoming week, we will have another critical bit of economic data in the spotlight: November’s CPI report. The headline inflation rate is expected to tick down but the core reading excluding volatile food and energy prices – a measure of the underlying trend that is often most meaningful for monetary policy – is seen rising for the first time in four months, to 2.2 per cent on-year.

The UK Parliament will vote on the Brexit deal negotiated by Theresa May. The outcome of that poll, as well as on-going tension over Italy’s budget, will then be discussed by at an EU leaders’ summit.

I would not expect any clear direction definition soon as we have reached the "year-end." But it is obvious that investors do not feel comfortable" being in the Euro Side"

Technically:
The pair ended the week around 1.1380, trading in within a symmetrical triangle at the end of a bearish movement. This formation is usually a sign of consolidation ahead of another directional move in the main trend. A break below 1.1250 should be quite encouraging for the Dollar bulls and open doors for a deeper decline.

On the daily charts, EURUSD is trading in the upper Bollinger Band, below EMA 50, MA 100 and MA 200. On the upside, I see two resistance levels which the pair must break. The first is at 1.14300 and the second is at 1.14740. A firm and clear breakout of those levels will be a strong call for Euro Bulls. This breakout may carry the price 1.15100 - 1.15300.