EURUSD Ascending Channel (Feb 02, 2017)

Price just bounced off the resistance at 1.0800 and might be due for a test of support at 1.0700.

The 100 SMA Is below the 200 SMA so the path of least resistance is to the downside. However, the moving averages are oscillating tightly so this could simply be indicative of consolidation. An upward crossover could draw more bulls to the mix and possibly allow the moving averages to hold as dynamic support around the middle of the channel.

Stochastic is on the move up to suggest that buyers are in control of EURUSD price action for now. In that case, the pair could make it back up to the resistance from here until the oscillator indicates overbought conditions and turns lower.

Economic data from the US came in stronger than expected, as the ADP jobs report printed a much larger than expected increase in hiring for January while the ISM manufacturing PMI also beat expectations. These signal that the January NFP could beat expectations and keep the Fed on track towards hiking rates soon.

However, the latest FOMC statement didn't turn out as hawkish as many predicted. The Fed removed the phrase referring to transitory effects of energy prices on inflation and acknowledged that consumer and business sentiment have improved. Still, the FOMC maintained that conditions warrant gradual tightening and risks are roughly balanced.

Up ahead, ECB Governor Draghi has a speech coming up and this might trigger some volatility for the euro even though he might simply repeat his remarks from a testimony earlier in the week. US initial jobless claims and preliminary non-farm productivity and unit labor costs are due.

By Kate Curtis from Trader's Way