The theme of the week has been “consolidation” on the forex. For the most part, the majors have traded within last week’s FED-fueled ranges, with the EUR/USD being among the most hotly contested. Since the bearish break of Tuesday, rates have rotated between 1.1250 and 1.1201, establishing an area of fair value near the 1.1225 quarter-handle.

Going into the weekend, more of the same may be in store. The economic calendar is relatively bare, highlighted by German PPI (June) during the U.S. overnight and Friday’s Michigan Consumer Sentiment Index (July). The headliner of this group is the Michigan Consumer Sentiment Index. Today’s Philly FED Survey came in unexpectedly high; if UM sentiment mirrors the robust performance, the EUR/USD may very well revisit the 1.1200 level.

EUR/USD Tightens Ahead Of The Weekend Break

The past 48 hours have produced a 44 pip trading range in the EUR/USD. At this point, the market structure is breaking down and action is becoming compressed.

There are two levels in this market worth watching ahead of Friday’s closing bell:

• Resistance(1): Daily SMA, 1.1249
• Support(1): Swing Low, 1.1193

Overview: In a Live Market Update from Tuesday, we illustrated the importance of downside support near 1.1200 and issued a buy recommendation. If you missed the update, check it out here. 

Featuring a lack of fundamental market drivers, Friday is very likely to be another slow session for the EUR/USD. However, the daily bearish trend remains intact and the 1.1200 handle has withstood two hard tests this month ― if challenged again, a southbound breakout is possible. 

Next week features an ECB Deposit Rate Decision and the much-anticipated U.S. Q2 GDP report. In the event that the EUR/USD is still in a heavy consolidation phase, these two releases have a good shot at sending exchange rates directional.