EUR/USD nosedived last week following the dovish monetary policy stance by the European Central Bank (ECB) and concerns regarding another inflation slowdown across the Eurozone during May. The pair broke the long term channel support and looks set to test another trendline support in the near future. The sentiment remains bullish due to Higher High (HH) in the recent upward wave.
As of this writing, the pair is being traded near 1.3761. A support may be noted around 1.3750 which is the 76.4% fib level ahead of 1.3739, 100 Simple Moving Average (SMA) and then the trendline support as demonstrated in the following chart. A break and daily closing below the trendline could incite a renewed selling interest, opening doors for a deeper correction below the 1.3600 handle.
On the upside, the pair is likely to face a hurdle near 1.3800 that is the psychological number and 61.8% fib level ahead of 1.3846, the 50% fib level, and then the swing high of the previous wave. The sentiment will remain bullish as long as the 1.3672 support area is intact.
Zew Economic Sentiment Survey
Tomorrow the Zentrum für Europäische Wirtschaftsforschung will release the Eurozone economic sentiment survey. According to the median projection of different economists the economic confidence increased to 63.5 points during May as compared to 61.2 points in the month before. The report is prepared on the basis of telephonic surveys and questionnaires, a higher than expected actual outcome is considered bullish for the EUR/USD and vice versa.
Another bearish breakout ahead of the next Consumer Price Index (CPI) figure seems highly unlikely, so buying the pair around the trendline support appears to be a good strategy; the trade should be stopped out on a daily closing below the trendline.