The EURUSD currency pair is feeling the weight of the bearish pressure, with the US Dollar showing resilience at the start of the week, setting the stage for the pivotal Federal Reserve interest rate decision. Last week’s US PCE data matched expectations, maintaining the year-over-year figure at 2.6%. With this number staying below the 3% mark, the market has largely factored in the conclusion of the tightening cycle.
All eyes are now on Jerome Powell’s post the Wednesday interest rate decision to assess whether early rate cuts are on the horizon. The CME FedWatch Tool currently indicates a 50/50 chance of rate cuts in March, making Wednesday a key influencer in the market’s reassessment of this probability. Meanwhile, the ECB in the Eurozone opted to keep rates unchanged last week, emphasizing that it’s premature to discuss rate cuts. A similar stance from the Federal Reserve might further strengthen the US dollar to the detriment of the EURUSD currency pair.
Technical
On the 4H chart, the currency pair has had multiple attempts to break out of the descending wedge pattern. However, it failed to gain sustainable traction and has fully retraced each attempt at a bullish run. However, the interest rate decision could inject some meaningful volume into the pair, potentially igniting another directional move.
The resistance at 1.0848 is currently preventing a breakout from the wedge. With low volumes expected in the upcoming two days, the pair could maintain its range below this level. However, if it breaks above, resistance at 1.0860 could be the first hurdle to cross. Above this level, clearance of the 25-SMA (green line) and 50-SMA (blue line) could signal a sustainable breakthrough and shift in momentum, leading to a retest of resistance at 1.0885.
Conversely, if the pair fails to exceed the 1.0860 level in the upcoming week, it could signal that the bears still maintain the upper hand. A pullback toward lower support at 1.0831 and 1.0817 then becomes likely, with neckline support established at 1.0800 in the longer term.
Summary
The EURUSD currency pair remains under pressure ahead of a crucial week in the foreign exchange markets. The Federal Reserve’s interest rate decision could drive directional price action, with resistance at 1.0860 a pivotal one to watch if a falling wedge breakout takes place.
Sources: Koyfin, Tradingview, CME Group
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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