The EURUSD has reversed course back to the upside after the weaker than expected retail sales data. Stock prices are tumbling in premarket trading. Bond yields are down once again (10 year trades at 1.787%). A fed rate hike is being pushed out on the back of the weaker data and expectations for slower global growth. Is the start of the short squeeze on?

EURUSD moves back above the 100 hour MA

EURUSD moves back above the 100 hour MA

From a technical perspective, the price of the EURUSD has pushed above the 100 hour moving average (see prior post Forex technical trading: EURUSD reaches next target and 9-year low, but rebounds ) at the 1.1808 level (blue line in the chart above). This week , the price has traded above this moving average on each trading day, but could not sustain the moves with additional momentum. Staying above will be needed if the squeeze to the upside is to continue (risk for longs).

On the topside, the 50% retracement of the move down from last week’s high to the low today comes in at the 1.18509 level. The 200 hour moving average (green line in the chart above) comes in at 1.18595 currently. The price of the EURUSD has not traded above the 200 hour moving average since mid-December. Finally, the 1.1876 level – the low price from June 2010 – is another important level that if the squeezes on, the price ultimately needs to surpass this level.

Remember, the US is one side of the story. The ECB next week is the other side of the story. The ECB is not likely to be applauding any signs of US weakness as they wonder what to do next/what they can do next. As a result, rallies higher will likely be healthy for declines later on as some of the speculation gets shaked out. The 1.1876 level will still key going forward – even if we go above it. I would expect that even if there is a move above, we will trade back below it in the not too distant future.