Resilient Euro, can it continue higher with German Employment and Inflation data ahead?

Today I’d like to look at the other side of the coin, what happens behind the scenes of the charts, in the fundamentals.

Euro has shown tremendous resiliency compared to other major currencies, as the data from the Euro Zone has shown improvement in the last couple of days. EURUSD traded as high as 1.3400 a number of times, but was unable to settle above it convincingly. Earlier in the week, German IFO Business climate Index jumped to 107.5 from the previous reading of 106.2, which shows further signs of improvement from the Germany.

There are two important fundamental events scheduled on Thursday i.e. German Employment figures and Inflation data.

German Employment
German Unemployment rate is expected to remain unchanged from 6.8% with the number of unemployed people during the previous month is expected to improve. Market is not expecting any surprise from the data, and if actual readings come in line with expectations, then it may further boost the Euro.

German Inflation
So far, German inflation has been under control, but slowly showing signs of weakness as shown in the chart below. However, it has managed to stay below the previous high of 2.5%. Economists are expecting German CPI to be around 1.7% this time against the previous of 1.9%. Any unexpected rise in the readings may further encourage the Euro bulls.

Euro has not only outperformed against the USD, but also against NZD, CAD and AUD. However, the main concern is that can it continue higher? EURUSD has been trading in a solid uptrend channel on the 4 hour chart as shown below. EURUSD bounced from this channel every time it has moved lower. As seen in the chart below, 1.3300 is acting as a strong support now, which was a resistance earlier.

As long as we are trading inside this channel, and above 1.3300, I expect the pair to continue trading higher. On the other hand, if we break this particular channel and have a 4 hour close below 1.3300, then bears might take control, and EURUSD can further slide close to the next support of 1.3200.

So, there can be two ways to trade EURUSD. First, buying close to channel support with a tight stop below the support levels. Secondly, wait for EURUSD to break the channel and support to enter a sell trade with a stop 30-40 pip stop.

Trade with stops while trading EURUSD in current conditions!

Happy Trading!