The EURUSD currency pair faced a 70 basis point decline this week, largely influenced by a resurgence in the US Dollar. This climb in the US Dollar emerged as traders reeled back their expectations for immediate rate cuts by the Federal Reserve.
The market’s focus revolved around pivotal events, including the unveiling of December’s policy meeting minutes. These minutes showcased the Fed’s confidence in taming inflation but also underscored concerns about the potential repercussions of maintaining a notably strict monetary policy on the economy. Despite these deliberations, the Fed hasn’t signalled a clear timeline for potential rate cuts, with some policymakers emphasizing the need to uphold prevailing restrictive rates.
Furthermore, recent data portrayed a continued deceleration in US manufacturing throughout December, albeit at a slower pace, coupled with a third consecutive monthly decline in job openings, indicating a gradual easing in labour market conditions. Looking ahead, market anticipation revolves around the forthcoming release of December’s Eurozone inflation figures and the highly awaited US Nonfarm Payrolls report.
Technical
The EURUSD pair experienced a notable upward trajectory nearing the end of 2023, securing a three-week streak of gains within an established uptrend. Positioned confidently above the 100-day moving average, it followed an ascending channel pattern.
During this ascent, a substantial support level materialized at 1.08884, propelling the pair beyond the psychological threshold of 1.10000. However, the journey encountered resistance at the 1.11393 mark, identified by overbought RSI conditions, prompting a retracement due to downward pressures.
The breakdown below the critical 61.80% Fibonacci Retracement Golden Ratio led to a full retracement back to the support level. A subsequent reversal occurred as oversold RSI conditions emerged, coinciding with an upturn in Germany’s regional inflation data, bolstering the Euro. If significant upward volume persists, a revisit to the 50% level could be imminent, signalling a potential upside interest point. Conversely, the 1.08884 support level might face a retest if bearish pressures mount.
Summary
The EURUSD faced a downturn amidst the Greenback’s resurgence, driven by tempered rate-cut expectations from the Federal Reserve. With U.S. data showing manufacturing slowdowns and labour market cooling, attention now turns to key reports, including Eurozone inflation figures and the US Nonfarm Payrolls. The near-term outlook hinges on upcoming data releases and the Federal Reserve’s policy stance, shaping the pair’s future movements.
Sources: Federal Reserve, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
