EUR/USD: On the defensive, eyes German IFO

• EUR/USD created a bearish candlestick pattern on Thursday.  
• A drop to key support at 1.1170 could be in the offing.  
• The bulls need the forward-looking German IFO  Expectations Index to beat estimates.  

The EUR/USD pair is looking heavy, having charted a bearish candlestick pattern on Thursday and could suffer a deeper drop in the European session if key German data disappoints expectations.

The currency pair fell by 0.24% on Thursday, engulfing preceding day’s high and low. Essentially, the pair carved out a bearish outside bar candlestick pattern, indicating a resumption of the pullback from the recent highs near 1.1180.

As a result, the pair could drop to 1.1070 – the support of the ascending trendline on the 4-hour chart.

Focus on German IFO

The Ifo Institute – Leibniz Institute for Economic Research at the University of Munich – will issue its report on German Business Sentiment at 8:00 GMT.

The Business Climate Index is predicted to decrease to 94.5 in October from 94.6 in September and the Current Assessment Index is forecasted to drop to 98.0 from 98.5.  Meanwhile, the Expectations Index is seen rising to 91.0 from 90.8.

The German economic slowdown is generally accepted by now and priced in. As a result, a weaker-than-expected Business Climate and Current Assessment figures may not hurt the EUR as long as the forward-looking Expectations Index beat estimates.

The rising trendline support at 1.1070 could be breached if the Expectations Index registers a bigger-than-expected drop.

Ahead of the IFO data, the pair may take cues from the GfK Consumer Confidence (Nov) scheduled for release at 06:00 GMT.

Technical levels