EUR/USD Technical Analysis: Bulls Have Momentum

EUR/USD is still strong with signs of tightening on the part of European Central Bank officials led by Lagarde.

  • The bank is determined to raise interest rates more times to contain record inflation.
  • This time it will be at a rate greater than what will be decided by the US central bank.
  • This helped the EUR/USD currency pair rebound upwards, with gains, towards the resistance level 1.0926, the highest for the currency pair since April 2022.
  • The currency pair may remain in bullish momentum until the actual passage of central bank decisions in the coming days.

Christine Lagarde said the ECB will do whatever is necessary to bring inflation back to its target, noting an "important" increase in interest rates at upcoming meetings. Lagarde said this week in a speech in Eschborn, Germany, that borrowing costs must rise at a steady pace to reach sufficiently constrained levels, and to stay at those levels for as long as possible.

The comments add to the debate over whether a slowdown in the pace of rate hikes is appropriate with inflation falling from an all-time high. Staying on track, Lagarde added last week, is her "political mantra," as officials' attention increasingly turns from the headline to record core inflation. "While energy inflation has been declining recently, core inflation continues to rise," Lagarde added this week.

Hawks like Dutch central bank chief Claes Nott want at least two more half-point rate hikes - starting next week - before this cycle ends. However, some caution against overdoing it. For his part, Greece's Yannis Stournaras on Monday called for a more gradual approach with weak growth in the eurozone economy.

Members who stuck with their demand for a larger 75 basis point increase saw it as the most direct response to financial conditions becoming inconsistent with inflation expected to remain higher for longer and risks remaining tilted to the upside. For them, enhancing communication was considered important in this environment, but it was not a substitute for a larger rate increase or a remedy for an insufficiently large increase.

EUR/USD forecast today:

There is no change in my technical point of view for the performance of the price of the EUR/USD currency pair, as the general trend is still bullish, and stability around and above the psychological resistance 1.0900 confirms this. Especially since the lights dimmed on the US dollar, as the markets expect a quarter point of raising the US interest rate at the nearest meeting. Currently, the closest resistance levels for the currency pair are 1.0940, 1.1020, and 1.1100, respectively, which are sufficient to push all technical indicators towards overbought levels.

On the other hand, according to the performance on the daily chart, the euro-dollar will exit from the ascending channel, in the event that it returns to the support level 1.0725. The euro will be affected today by the announcement of the German IFO reading.

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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