The EURUSD currency pair takes centre stage this week, brimming with anticipation for pivotal events. The Eurozone is poised for an impactful interest rate decision while the US prepares to unveil crucial inflation data through the PCE Price Index. These revelations hold the power to swiftly reshape the market dynamics for the currency pair as uncertainties loom over the future monetary environments of both economies.
Amid expectations of the ECB maintaining rates at 4.5%, the real game-changer lies in the commentary surrounding future decisions, elevating its significance. In the US, the anticipated stability of the PCE Price Index at 2.6% introduces an element of suspense, opening the door to potential price movements if surprises unfold.
Already, the market has adjusted its expectations for Federal Reserve rate cuts in March, and any unforeseen inflation upturn could fortify the greenback, exerting pressure on the EURUSD currency pair.
Technical
On the 4H chart, a falling wedge pattern has emerged from the peak of the prior uptrend toward the end of December. The crossing of the 50-SMA (blue line) and 25-SMA (green line) confirms the bearish momentum. Still, a recent uptick holds the potential for a breakout from the dynamic resistance, making the weekly economic data ever more important.
Resistance at 1.0904 prevents a sustainable uptrend and could act as a pivot point for a retracement toward 1.0893 to retest the breakout level. If the price remains above this support, the sustainability of the breakout could be confirmed, making the 50-SMA resistance a potential level of interest. A crossing above the 50-SMA could see the pair reach the Fibonacci midpoint and 61.8% Fibonacci golden ratio at 1.0923 and 1.0941, respectively, in the upcoming sessions.
Conversely, if a retracement pushes the pair below support at 1.0893, it could signal a fake-out. In this case, the prior downtrend could continue toward 1.0878, where the 25-SMA provides additional support. Any movement below this level could signal confirmation of a sustained downtrend, bringing lower support at 1.0860 back into the equation.
Summary
The EURUSD currency pair is looking ahead at a crucial week of economic data releases. The falling wedge is threatened by a breakout, and any new economic developments could either confirm or deny the bullish run in the upcoming sessions.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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