- EUR/USD created a bearish inverted hammer candle on Friday, establishing 1.12 as key resistance.
- A bearish hammer reversal would be confirmed if the spot closes Monday below 1.1102.
- Better-than-expected German PMI is needed to avoid a bearish close.
EUR/USD chated a bearish inverted hammer candlestick pattern on Friday, aborting the immediate bullish view and establishing 1.12 as the level to beat for the bulls.
The inverted hammer, due to its long upper wick, is widely considered a sign of buyer exhaustion. A bearish reversal is confirmed only if the follow-through is negative, preferably in the form of a close below the candle’s low.
As a result, Friday’s low of 1.1102 is the level to beat for the sellers.
Focus on PMIs
Monday will see the release of the preliminary Purchasing Managers’ Indices (PMI) across the Eurozone.
The German Markit Manufacturing PMI for December, due at 08:30 GMT, is forecasted to print at 44.5 compared to 44.1 in November.
A big beat on expectations would reinforce the view put forward by last week’s better-than-expected ZEW survey and will likely draw bids for the common currency.
Post-German data, the focus will shift to the Eurozone PMI, due at 09:00 GMT, and Labor Cost (Q3), scheduled at 10:00 GMT.
The US and China have reached a phase-one trade deal, which is good news for Germany. However, the offshore Yuan (CNH) is struggling to gain ground and the USD/CNH pair is teasing a break above 7.00. The EUR, therefore, is unlikely to benefit much from the calm on the trade front.
At press time, EUR/USD is trading at 1.1133, representing a 0.14% gain on the day.
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Technical levels
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