An important and fateful trading week awaits the exchange rate of the euro currency pair against the US dollar EUR/USD where both the European Central Bank and the US Federal Reserve Bank will announce their monetary policy decisions ending with the announcement of the US jobs numbers. During last week's trades, the bull succeeded in testing the 1.0929 resistance level before the currency pair was exposed to selling operations towards the 1.0837 support level and closed the trading stable around the 1.0867 level.
According to the latest trades
The US dollar fell against the yen as traders bet that the optimistic axis from the Bank of Japan (BOJ) is still in the near future. Accordingly, the US dollar also fell near its lowest level in nine months against the euro, amid market expectations that the European Central Bank will this week implement an interest rate hike by twice as much as the Federal Reserve.
According to the performance, the euro is headed for a 0.4% rise since last Friday in the third week of gains in a row. and was 0.07% stronger at $1.08975 on the day, retreating to an overnight high of $1.09295, a level last seen in April 2022. Traders widely expect the Fed to raise interest rates by 25 basis points next Wednesday, down from a 50 basis point increase in December. Meanwhile, the European Central Bank was all but committed to raising its key interest rate by half a percentage point on Thursday.
Accordingly, the US dollar approached its lowest level in eight months before the central bank meetings.
The European Central Bank's first policy meeting of 2023 is almost certain to deliver the half-point increase President Christine Lagarde promised in December. The survey results indicate that officials will not be inclined to ease - even with declining inflation, falling energy prices, and the Federal Reserve Board considering a downward shift in its rate hike cycle. And Lagarde and her hard-line colleagues point to the possibility of a similar move already happening in March - with the financial markets considering that the most likely outcome. However, some members of the 26-member governing council say they prefer a more gradual approach. Four of the 46 economists see only a quarter of a point that month.
Technical analysis of the EUR/USD pair:
- In the near term and according to the performance on the hourly chart, it seems that the EUR/USD currency pair is trading within the formation of a descending channel.
- This indicates a significant short-term bearish bias in market sentiment.
- Therefore, the bearish speculators will look to extend the current series of declines towards 1.0838 or lower to the 1.0812 support.
- On the other hand, the bulls will look to pounce on profits at around 1.0893 or higher at the 1.0921 resistance.
In the long term and according to the performance on the daily chart, it seems that the EUR/USD currency pair trades within the formation of an ascending channel. This points to a large long-term upward wound in market sentiment. Therefore, the bulls will target long-term profits at around 1.1003 or higher at 1.1154. On the other hand, the bears will be looking to pounce on possible pullbacks around 1.0724 or below at the 1.0675 support.
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