The EURUSD currency pair has experienced a downward trend over the past four weeks, with the pair continuing its decline by ten basis points into the new week.
This downward momentum can largely be attributed to the strengthening of the U.S. Dollar, fueled by several key factors, including a robust labour market and subdued expectations of a rate cut. Notably, the latest U.S. Nonfarm Payrolls report, surpassing expectations by nearly double, significantly bolstered the Greenback, prompting a shift in rate cut expectations from 77% down to 17.5% for March.
This sudden shift has further reinforced the Dollar’s position, as higher yields often attract increased demand for the currency. As traders eagerly await Tuesday’s U.S. inflation rate data, the focus remains on deciphering the potential implications for future monetary policy decisions, shaping the direction of the EURUSD pair in the near term.
Technical
The EURUSD pair has been firmly entrenched in a downtrend, with prices consistently trading below the 100-day moving average, signalling bearish sentiment. Further reinforcing this trend is the presence of a descending channel pattern, affirming the downward trajectory.
Overbought RSI conditions at the 1.08975 resistance level, aligning with the upper boundary of the channel, triggered the recent selloff, prompting a decline towards the key support level at 1.07238. However, a reversal has ensued, with oversold RSI conditions emerging at this support level, suggesting potential upward movement.
Currently, the 50% Fibonacci Retracement level acts as a crucial obstacle to further upside momentum. Should selling pressures persist, a retest of the 1.07238 support level is likely. Conversely, a breakout above the 50% level, accompanied by high volume, could indicate a renewed market appetite for the upside, potentially propelling prices towards the 61.80% Golden Ratio level. Traders will likely closely monitor these technical indicators and market dynamics to navigate potential shifts in the EURUSD price action.
Summary
With the EURUSD downtrend fueled by a robust U.S. Dollar, traders eagerly await U.S. inflation data for insights into future monetary policy. Technical analysis indicates bearish sentiment, with resistance at 1.08975 and support at 1.07238. The 50% Fibonacci Retracement level poses a critical barrier to the upside.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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