The EURUSD currency pair faced significant downward pressure, marking back-to-back days of losses and potentially poised for further decline.
This trend emerged amidst a backdrop of robust U.S. economic data, particularly a higher-than-anticipated inflation reading for January, which surpassed market expectations at 3.1%. Although this figure represented a slight decrease from the previous month, the fact that it remained above forecasts triggered market reactions.
Consequently, expectations for a rate cut in May plummeted from 53.2% to 36.4% following the release of the Consumer Price Index report. Additionally, upbeat Nonfarm payrolls data underscored the strength of the U.S. labour market, initially diminishing prospects for monetary easing. Traders have turned to the dollar as a safe haven asset, drawn by its perceived stability and the attractiveness of U.S. bonds offering high yields. These developments have positioned the EURUSD pair amidst a challenging landscape, influenced by shifting economic indicators and market sentiment.
Technical
The EURUSD currency pair has experienced a downtrend, evident in its movement within a descending channel pattern and trading below the 100-day moving average.
Wednesday’s session saw the pair plummeting to a two-month low, indicating heightened bearish pressures and approaching the lower boundary of the descending channel. With the breach of the 1.07238 support level, the pair faces further downside potential.
However, amidst this bearish sentiment, there’s a potential for a reversal. The oversold RSI conditions could suggest that selling pressure may be reaching exhaustion, signalling a possible shift in momentum. If a reversal materialises, the 1.07238 level, now turned resistance, could become a point of interest for bullish traders looking for upside opportunities.
Summary
The EURUSD pair faces downward pressure amid robust U.S. economic data. With the breach of the 1.07238 support level, further downside is possible. Yet, oversold RSI conditions hint at a potential reversal, with the 1.07238 level now serving as resistance, offering possible upside opportunities for bullish traders amidst shifting market sentiment.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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