The EUR/USD exchange rate saw its best week since July last week, but analysts noted that the advance leaves the eurozone's single currency looking overextended and at risk of a setback over the coming days. Recently, the gains of the upward rebound of the EUR/USD currency pair reached the 1.0951 resistance level, its highest in three months, and the nearest point of the 1.1000 psychological resistance, which may support stronger control for the bulls on the trend.
In general, the bulk of the previous week's gains came after US inflation numbers, which came in below expectations. Thus, this reinforced the argument that the Federal Reserve could end the cycle of raising US interest rates and look to the future of cuts. Support from global market sentiment and lower US bond yields helped EUR/USD rise to 1.0895, but gains have since faded.
Euro price expectations in the coming days:
Commenting on the performance of the currency pair. “EUR/USD has not shown any appetite to move much in either direction,” says Fouad Razaqzadeh, an analyst at City Index. The buying momentum has faded and will likely need fresh macro stimulus to push it higher from here.” “However, given the temporary highs and higher lows, and despite the difficulties in the second half of the week, we expect any short-term declines to support finding buyers,” he added.
Meanwhile, the analyst explains that the EUR/USD is witnessing an upward consolidation that has allowed the “overbought” levels to be resolved in the short term. Also, “On the upside, the 50% retracement level just below the 1.09 resistance is the middle of the nearly year-long consolidation range within which the EUR/USD pair has been stuck,”. he added, If the bulls reclaim this area, a move higher could lead to the 1.10 psychological resistance.”
Moreover, the analysts at UBS are joining those who say the higher move in EUR/USD has extended even further and are making the exchange rate sell-off the 'trade of the week'. Adding, “We would like to sell the upside in EUR/USD at 1.10 over the next month,” says Dominic Schneider, an analyst at UBS. Finally, “The rise in the EUR/USD rate has been very significant, in our view, from an inflation surprise and perspective.” Relative rate.”
On the other side, Westpac Bank expert Richard Franulovich stated that any setback for the euro against the dollar towards the 1.08 support level is likely to find support in the coming days. He added, “But until rebounds in the main regional indicators appear in clearly strong data, the upward rise in the EUR/USD pair after the 1.10 resistance is likely to be a difficult step, and the US dollar leg is likely to bear a lot of the heavy lifting.”.
Nevertheless, the analyst believes that EUR/USD above 1.08 “appears overvalued” relative to German Treasury yield spreads, which are still not moving decisively in Favor of the euro. US drivers, such as weak employment data and inflation, were the main determinants of the EUR/USD trend over the past month. However, this week only sees second-order data from the US, which may limit EUR/USD volatility.
EUR/USD Today Expectations and Analysis
There is no change in my technical view of the performance of the price of the currency pair EUR/USD. Obviously, there is a clear shift in the general trend, which remained bearish before the beginning of this month’s trading, which witnessed a shift that is now awaiting a move towards the psychological resistance level of 1.1000 to confirm the bulls’ control over the trend. Thus, this requires further weakness of the dollar, which is expected today to announce the content of the minutes of the last meeting of the US Federal Reserve.
Therefore, according to the performance on the daily chart below, the EUR/USD movement towards the psychological resistance level of 1.1000 will move the technical indicators towards strong overbought levels. On the other hand, over the same period, the EUR/USD moved towards the support level of 1.0770, which represents a collapse of the current upward correction.
.jpeg "EUR/USD (Daily Chart)")