The EURUSD currency pair underwent a significant shift this week amidst a notable decline in the Greenback’s allure following the Federal Reserve’s interest rate pause. Despite maintaining rates between 5.25% – 5.50%, the dollar faced a downturn, spurred by the dovish tone accompanying the decision, notably influenced by Jerome Powell’s subtle hints signalling a potential conclusion to the rate hiking cycle.
This shift in sentiment towards the dollar is particularly striking, resonating with market participants amidst widespread projections of a lower policy rate by the end of 2024, a sentiment echoed by the CME FedWatch Tool indicating an 89% probability of an impending rate cut as early as March 2024.
Consequently, the Euro capitalized on this Greenback weakness, enjoying a four-day streak of trading higher against the U.S. currency. As the week progresses, market focus intensifies on imminent economic indicators, most notably the PCE Price Index—a pivotal gauge of inflation favoured by the Federal Reserve—scheduled for release in the upcoming week.
Technical
The EURUSD currency pair has experienced a dynamic interplay of trends, showcasing a notable uptrend above the 100-day moving average. November witnessed a surge propelling the pair, establishing support at the 1.06561 level. However, a subsequent dip interrupted the longer-term uptrend, leading to a breakdown below an ascending channel pattern and culminating in resistance at the psychological barrier of 1.10000.
Remarkably, amidst this ebb and flow, the market found support at a significant technical level—the 61.80% Fibonacci Retracement Golden Ratio. This pivotal moment sparked a reversal, propelling the pair back toward the formidable 1.10000 psychological level.
Should the current bullish trend persist, the resistance level at 1.10000 could be retested in the coming trading sessions. Conversely, a resurgence of downside pressure might see the Golden Ratio emerging as a critical barrier, shaping the pair’s trajectory against downward momentum.
Summary
The EURUSD pair navigated a remarkable shift propelled by the Greenback’s weakness after the Fed’s dovish stance. Despite facing hurdles near the psychological level of 1.10000, the pair found solace at the 61.80% Fibonacci Retracement Golden Ratio, sparking a rebound. The upcoming sessions may witness a retest of resistance at 1.10000, yet the Golden Ratio stands as a crucial determinant against potential downward pressures.
Sources: Federal Reserve, CME, Reuters, TradingView
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