Last week, EUR/USD failed to close above 1.0320 and the 50-Day Moving Average, presenting a potential bull trap and setting up the opportunity for short sellers.
Although the pair broke below the parity on Aug. 22, a decent pullback is on the table as investors become uncomfortable with the unusual valuation of the pair. One only has to look back to Jul. 14 to witness the pullback in the EUR/USD after an intraday probing of the parity level.
Bears should remember that we might still be in the middle of a downward leg. So, the medium-term decline may extend to new depths. 0.9900 has already been tested and rejected, but a more granular look at the candles might be necessary at this point.
The Intraday Battle
The EUR/USD spent most of its time consolidating below parity hovering near 0.9930 before the release of data from Europe and the market open in London.
Below, on the hourly chart, you can see the first of the two big blue candles forming after consumer confidence in the Euro Area rose by 2.1 points in August, from a record low of -27 in July. Consumer confidence was expected to slide further into negative territory, so the upwards revision surprised the markets.
Two subsequent hourly candle wicks broke above parity to test the staying power of a below-parity EUR/USD. For now, support is building below 0.9960. In the short term, the market might need to work to take out buyers at 0.9900.