EUR/USD held a tight range throughout the previous week and the same trend is expected to continue this week ahead of the European Central Bank (ECB) monetary policy announcement. The pair might test the long term channel support before the ECB interest rate decision.
As of this writing, the pair is being traded near 1.3834. A hurdle can be seen around 1.3853, the 61.8% fib level, ahead of 1.3896, the 76.4% fib level and then 1.3966 that is the swing high of the previous wave as demonstrated in the following chart.
On the downside, the pair is expected to find a support around 1.3784, the 38.2% fib level, ahead of the channel support which is currently sitting in near 1.3780. A break and daily closing below the channel support will push the pair into correction phase, opening doors for the fresh lows below the 1.3600 handle. The current market sentiment is slightly bearish due to Lower High (LH) in the most recent upward rally; a Lower Low (LL) will confirm the bearish sentiment.
Germany Import Price report is scheduled for release on Monday. According to the median projection of different economists, the import prices declined by 0.2% in March as compared to 0.1% decline in the month before, worse than expected actual outcome will be seen as bearish for the EUR/USD and vice versa.
There might be two good trade strategies for EUR/USD this week. First, consider selling on rallies around the 0.3900 handle, keeping the stop loss near 1.3950. Secondly, consider selling on a daily close below the trendline support. A breakout through the long term channel support will open doors for steep losses towards the old levels around 1.3500 or even below.