The EURUSD currency pair experienced a notable shift in sentiment last week, culminating in a significant downturn after three consecutive weeks of gains.
This downturn was spurred by contrasting economic dynamics between the Euro Area and the United States. While Euro Area inflation remained steady at 2.6%, indicating progress towards its 2% target, the U.S. grappled with higher-than-expected inflation at 3.2%.
Last week’s data showcased resilience in the U.S. economy. Strengthening 30 basis points beyond expectations, the U.S. Producer Price Index highlighted lingering inflationary pressures, while declining jobless claims underscored a robust labour market. Consequently, traders favoured the U.S. Dollar, prompting a decline in the Euro. Looking ahead, market attention is squarely focused on the Federal Reserve’s impending interest rate decision, offering critical insights into the monetary policy stance of the world’s largest economy.
Technical
The EURUSD pair has been navigating an uptrend, supported by its position above the 100-day moving average.
However, selling pressures emerged at the 1.09638 level, triggering a sharp decline. Fortunately, the 100-day moving average at 1.08728 acted as a sturdy support level, preventing further downward momentum.
Currently, a retracement is underway as bullish forces resurface, with the pair retracing towards the 38.20% Fibonacci Retracement level. If this level holds as resistance amid mounting bearish pressures, a retest of the 1.08728 support is likely. Conversely, a high volume breakout above the 38.20% level could signal further gains, potentially targeting the 50% level. As traders monitor these key levels, market sentiment will play a crucial role in determining the pair’s future trajectory, balancing between bullish and bearish pressures amid evolving economic dynamics.
Summary
The EURUSD pair faced a downturn, ending its three-week winning streak amid contrasting economic dynamics. While supported by an uptrend and the 100-day moving average, selling pressures at 1.09638 triggered a decline, met by sturdy support at 1.08728. The 38.20% Fibonacci Retracement level will likely play a pivotal role in the short term.
Sources: Eurostat, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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