The EURUSD currency pair is currently at a pivotal juncture, hinting at a potential second consecutive week of gains. Reaching a notable 19-week high, the pair has surged by 1.20% this week, reflecting a market sentiment favouring risk assets over the Greenback.
Crucially, the market anticipates a substantial 150 basis points worth of rate cuts by the Federal Reserve in 2024, encompassing six potential 25-basis-point reductions. The anticipation is palpable, with the first rate cut forecasted for March, underlining the market’s assessment of the economic landscape.
Today’s eagerly awaited PCE Price Index assumes significance as it carries the potential to sway the pair’s trajectory. Traders keenly await this inflation metric, poised to evaluate whether their projected rate-cut scenarios align with the inflationary reality.
Technical
The EURUSD pair has showcased a dynamic interplay of market forces in recent movements, tracing an intriguing path above the 100-day moving average. November’s surge drove the pair upwards, establishing a strong foothold at 1.06561. However, subsequent fluctuations disrupted the longer-term uptrend, leading to a breakdown below an ascending channel pattern and encountering resistance at the psychological barrier of 1.10000.
A significant turn of events emerged as the market found support at the crucial 61.80% Fibonacci Retracement Golden Ratio. This pivotal moment spurred a reversal, steering the pair back toward the formidable 1.10000 level. The breakout above this level could signify a bullish sentiment prevailing in the market, possibly pushing the pair to retest the 1.10649 resistance level formed in August. Nevertheless, a resurgence of downward pressure might see the 1.10000 level reemerge as a significant point of interest to the downside.
Summary
The EURUSD’s potential second consecutive week of gains reflects market shifts favouring risk assets, witnessing a surge amid expectations for significant rate cuts by the Federal Reserve. The pair’s recent movements, supported by key technical levels, portray a delicate balance between bullish momentum and potential downward pressure.
Sources: Reuters, CME, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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