As the new week unfolds, the EURUSD currency pair encounters early pressure as the US Dollar advances in anticipation of a week brimming with significant events. Thursday’s unveiling of the US PCE data, a pivotal gauge of inflation for the Federal Reserve, assumes centre stage. Adding to the intrigue, Friday unveils inflation figures from the Eurozone, setting the stage for a potentially volatile week’s end.
Amidst these headline events, scrutiny extends to the preceding days, featuring insights from over 10 Fed speakers. Their commentary can potentially reshape market expectations regarding the timing of the central bank’s first rate cut. Presently, markets are inclined toward a rate reduction post-June, with a 68% likelihood of rates being lower by at least 25bps following the June meeting, as per the CME FedWatch Tool. Yet, the forthcoming week may pivot this sentiment as fresh data emerges.
Technical
On the daily chart, there has been a breakout from the descending channel formation, with the currency pair pushing through the 25-SMA (green line), which has crossed above the 100-SMA (orange line) in a signal of short-term bullish dominance. These SMAs underpin the currency pair’s price action and could provide the support needed to achieve a sustainable bullish trend reversal if the price can push through resistance at 1.0841.
If the resistance at 1.0841 gets cleared, the pair looks poised to reach the 50-SMA (blue line) at the psychological resistance of 1.0886, where the initial run was halted. The Fibonacci midpoint at 1.0917 becomes a level of interest, with the 61.8% Fibonacci golden ratio at 1.0969 established as another crucial level of resistance that could trigger a reversal.
However, if resistance at 1.0841 holds in the upcoming session, the price action could be unsustainable above the dynamic resistance of the prior channel. Support at 1.0786 could be the determining level, as an additional leg below this support could confirm the return of bearish momentum, which could drive the price toward 1.0741 in the upcoming sessions to return to the prior descending channel.
Summary
The EURUSD currency pair has given back some of its recent gains as the greenback returned to strength following the latest hawkish comments from Federal Reserve officials. The upcoming week is headlined by multiple inflation releases, which could alter the price’s trajectory in a potentially volatile close to the week.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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