The EURUSD currency pair is currently navigating a period of consolidation, seeking clear direction amidst recent market signals that present a mixed sentiment. Initially fuelled by the strength derived from a robust labour market report, where December’s Non-Farm Payrolls (NFP) outperformed expectations by revealing the addition of 216,000 jobs compared to the anticipated 170,000, the US dollar experienced a surge. However, this momentum was swiftly countered by a less-than-encouraging report from the ISM, indicating a decline in the Services PMI from 52.7 to 50.6, falling short of the 52.6 forecast.
At present, the market’s retreat in risk appetite is bolstering the US dollar, creating a challenging landscape for the EURUSD currency pair as it approaches Thursday’s inflation data. The intricate interplay of these factors adds an element of suspense to the current market scenario, making it a compelling and dynamic environment for traders.
Technical
On the 4H chart, the descending channel experienced a breakout, but the bulls failed to gain traction as the currency pair entered a consolidation phase. The sideways movement leaves the door open for the formation of a new sustainable trend following the release of the US inflation data on Thursday.
Currently, support at 1.0905 keeps the bulls in play, while resistance at the 25-SMA (green line) around 1.0941 is preventing an upside rally. A breakdown below 1.0905 could trigger a test of the 61.8% Fibonacci golden ratio at 1.0883, which could catalyse a new downtrend toward 1.0848 if an additional breakdown occurs.
Conversely, a sustainable move above the 25-SMA could confirm a bullish shift in the shorter-term momentum. In this case, the currency pair could push on toward 1.0968 and 1.1011 in the upcoming sessions, should the US inflation data weigh on the dollar.
Summary
The EURUSD currency pair is consolidating after a descending channel experienced a breakdown. Support at 1.0905 could be crucial in the upcoming sessions as eyes turn to the US inflation report on Thursday.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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