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Bear Flag Pattern Foreshadows Lower EUR/USD
The EUR/USD has edged back below the 1.14 level, but is forming a bear flag pattern which is an ominous sign for further gains. Germany rejected the Greek proposal and said that it does not offer a solution while the EU said there were positive signs within the Greek letter. Better than expected US jobless claims allowed the greenback to regain some traction, following last week’s jump.
The EU said that there are positive signs in the Greek letter and that it may in fact pave the way for a reasonable compromise, but Commission President Juncker always seemed more willing to give in to Greek demands, than the Eurogroup, which has to defend any agreement at national level.
Germany says Greek proposal doesn’t offer a substantive solution. Germany’s Jaeger said the Greek plan still seeks bridge funding, without fulfilling the program that is without conditions. He added that the letter is not in line with the agreed Eurogroup criteria. The Greek statement already seemed to imply that Greece only asked for an extension of the bailout loans, not an extension of the full program, which ties the aid funds to strict conditions and troika oversight.
U.S. initial jobless claims fell 21k to 283k in the week ended February 14, following the 25k jump to 304k previously. That brought the 4-week moving average down to 283.25k versus 289.75k previously. Continuing claims rose 58k to 2,425k for the week ended February 7 after a 39k decline to 2,367k previously.
The EUR/USD is forming a bear flag pattern which is a continuation pattern that pauses and then refreshes. Stronger US economic data will likely be the catalyst that pushes the exchange rate through the recent lows. The RSI (relative strength index) has rebounded twice in the last 6-months to the 50 level before sellers came in and pushed the currency pair lower.
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