Since the start of this week's trading, the exchange rate of the EUR/USD currency pair is on a rebound path to the upside. It is starting from the support level at 1.0525, reaching the resistance level at 1.0760, and settling around the level of 1.0740 at the time of writing the analysis. The rebound gains were primarily due to the weakness of the US dollar after the divergence of US job numbers, in addition to the successive collapse of some US banks due to more US rate hikes.
Yesterday, US inflation figures were announced, which were also not in favor of the dollar. Today, attention is paid to US retail sales figures and the PPI reading, which may have an impact on the course of closing the euro/dollar for this week.
The EUR/USD currency pair is trading affected by the results of the latest economic data, as it was announced that the US Consumer Price Index, excluding foodstuffs and energy, exceeded the expected change (monthly) by 0.4%, with a change of 0.5% recorded. On the other hand, the equivalent (yoy) matches the expected change of 5.5%, down from 5.6% in January. The overall CPI for the period was also in line with the estimated (yoy) change of 6%, down from 6.4%, while its equivalent (mom) matched the expected change of 0.4%.
In the European Union, all eyes will be on the interest rate update that the European Central Bank will release tomorrow, Thursday, as the market expects to raise the interest rate by 50 basis points, to 3%. But before that, investors will be looking forward to reading the German Wholesale Price Index for February on Wednesday. The US will also release retail sales data later in the day.
In general, the single European currency - the euro - has been a prominent beneficiary of broad declines in US dollar prices since financing pressures in some small US lenders began to build dramatically over the weekend failures of Silicon Valley Bank and others, prompting the market to rethink prospects for policies.
Stephen Gallo, FX Analyst at BMO Capital Markets, said, “If the ECB evades a 50 basis point hike this week or retracts its prior commitment to a follow-on move in May, FX investors will interpret the dovish response as a clear sign of panic.” Alternatively, continuing unapologetically hardline politics may dampen risk appetite. Assuming that the FX market remains very nervous for the rest of the week, I would expect this dynamic to cap EURUSD's gains at 1.0800."
Technical analysis of the EUR/USD pair:
- On the near term, it appears that the EUR/USD is trading within a bullish channel formation.
- This indicates a significant short-term bullish bias in market sentiment.
- Therefore, the bulls will be looking to extend the current rally towards 1.0786 or higher to the resistance at 1.0827.
- On the other hand, the bears will target potential pullback profits around 1.0702 or below at support 1.0663.
On the long term, and according to the performance on the daily chart, it appears that the EUR/USD pair has recently completed an upward breach from the descending channel formation. This indicates a significant swing in market sentiment from bearish to bullish. Therefore, the bulls will target an extended rebound profit at around 1.0898 or higher at the resistance at 1.1028. On the other hand, bears will be looking to pounce on profits around 1.0579 or below at 1.0448 support.
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