- Since the middle of trading this week, the EUR/USD currency pair has been on an upward rebound, with gains reaching the resistance level of 1.0964.
- So far, the psychological resistance of 1.1000 has remained an obstacle for the bulls to take further control of the trend.
- This requires weak results from US economic data this week and a calming of expectations about the future of the Fed’s tightening policy.
Amid the bullish bias, the EUR/USD currency pair is likely to receive signals from US reports such as the Consumer Price Index, the Producer Price Index, and retail sales figures. These are expected to set the tone for the Federal Open Market Committee (FOMC) decision next week.
Remember, the data points were mostly below expectations last week, although the US Non-Farm Payrolls report still surprised to the upside. However, another round of downbeat data may undermine the US Federal Reserve's hawkish bias and translate into losses for the US dollar. On the other hand, strong inflation and spending numbers could reinforce the view that the US economy is resilient and that the Fed is capable of keeping borrowing costs high for longer, which could lead to gains for the US dollar. In contrast, there are no major reports from the euro zone this week, so the single currency may continue to act as a counter-currency in the coming days.
According to currency trading platforms, the DXY dollar index stabilized around 102.9 on Wednesday as investors continued to assess the hotter-than-expected US inflation data and its implications for the timing of US interest rate cuts by the Federal Reserve.
On Tuesday, the data showed that the headline US inflation rate accelerated to 3.2% in February, higher than expectations and the January figure of 3.1%, while the core rate fell to 3.8% from 3.9%, but still higher than expected at 3.7%. Both metrics rose 0.4% monthly. Currently, markets expect the Fed to keep US interest rates steady in March and May, while traders continue to bet on this move in June. Investors are now looking forward to US retail sales numbers and producer inflation data later this week.
Overall, the US dollar has held steady across the board, but has remained volatile against the Japanese yen amid growing speculation that the Bank of Japan may adjust its monetary policy this month.
EUR/USD Technical analysis and forecast:
Recently, the price of the EUR/USD pair broke through the secondary psychological resistance level at 1.0850 and reached the highest level at 1.0982 before declining. Technically, Fibonacci retracement levels show where more buyers may be hoping to enter. Clearly, the 38.2% level holds as support at the 1.0909 area so far, but a deeper correction could reach the 50% Fibonacci level at 1.0887 near the 200 SMA or the 61.8% Fibonacci level which is in line with previous resistance. Therefore, if any of these levels are able to control losses, the EUR/USD price may resume rising to the highest level or higher.
At the same time, the stochastic indicator is already moving higher indicating that the buyers are in control, and the oscillator has a little room to rise before indicating exhaustion among the buyers. Also, the RSI is in the middle zone to indicate consolidation, but the oscillator appears to be pointing slightly higher as well. Finally, a break below the 61.8% Fibonacci level may indicate that Euro bulls have taken control and could pull EUR/USD to the lows of 1.0800 next.
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