The continued pressure on the US dollar before the announcement of influential US economic data contributed to the bulls achieving more gains for the EUR/USD up to the resistance level of 1.0926.
- The pair is stable at the time of writing the analysis and is the highest for the currency pair since April of 2022.
- This is despite the recent European tightening signs.
- The European Central Bank has been much slower than the US in raising interest rates.
- This is partly due to the setbacks that occur in the existence of one monetary union but several different financial approaches between the countries.
Heavily indebted countries like Italy are hit hardest by rising interest rates, as interest payments on their debt become more of a burden, not a good problem when the continent is already on the brink of recession. However, on the flip side, more fiscally disciplined countries like Germany want higher rates to curb inflation.
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EUR/USD's rally could cap near current levels in the short term according to new technical analysis of the pair, however the euro is expected to remain strong and eventually reach new highs. This is according to the technical analysts at Credit Suisse who say that the EUR/USD exchange rate has now risen to their “core target” at 1.0900/44, which is a 50% retracement of the 2021/2022 decline and return. from the broken uptrend from early 2017. Credit Suisse analysts added: "With this also the upper end of the trend channel from last September, we will continue to look for this to cap and determine the upper end of a broad range."
According to the performance, the price of the EUR/USD pair has risen by 13.5% since its lowest levels in late September.
The main drivers of the recovery include the drop in gas prices in the European Union, the reopening of the Chinese economy, the expected end of the cycle of interest rate hikes in the US Federal Reserve Board and the expectations of a 50 basis point increase in interest rates from the European Central Bank. However, these positive developments are now well-understood by the market. The possibility of easing upside is increasingly likely, especially if technical hurdles spread on the way to the top.
While Credit Suisse's technical analysis identifies a potential cap in the near term, the "big picture" remains an ongoing strength. The analyst added "the euro itself is likely to remain strong in our view and we believe that the top here, if indeed seen, is likely to be temporary now only before the final breakout to the top, with the next resistance at 1.1055, then 1.1185 the March 2022 high".
Expectations of the euro against the US dollar today:
Expectations of a tightening of the European Central Bank's policy are still supporting further gains in the EUR/USD currency pair. It is also despite the technical indicators reaching saturation levels after the pair's recent gains. If the American economic data figures come, led by the announcement of the reading of the gross domestic product and commodity orders, longevity and the number of weekly unemployed claims are less than the market's expectations, the bulls may move the euro/dollar currency pair to break through the next psychological resistance 1.1050. This would move the technical indicators strongly towards levels of buying saturation.
On the other hand, on the contrary, if the numbers come in better than expected, the euro dollar may be exposed to selling operations to reap the profits again and retreat before the bulls look for the stimulus to complete the current path. This may remain supported until the announcement of the policy of both the European Central Bank and the American Federal Reserve Bank.
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