Sat, May 18, 2024

EUR/USD Faces 3.4% Drop Amid US and EU Economic Shifts

euro (EUR), European currencies rallied on Monday. What about Dollar?

Quick Look:

  • EUR/USD faces a pivotal week with key US and EU economic indicators.
  • Resistance and support identified: Resistance at 1.0754, Support at 1.0654.
  • Upcoming US inflation data and central bank decisions are critical for the short-term outlook.

The EUR/USD currency pair is moving toward a crossroads, facing challenges and opportunities. Investors and traders are vigilant on pivotal US and European economic indicators that could significantly influence the currency pair’s direction.

EUR/USD Rebounds 1.3% Before 3.4% Drop; Faces Resistance at 1.0754

The EUR/USD pair recently demonstrated notable resilience, rallying 1.3% from its yearly low. However, this recovery seems precarious as a substantial sell-off followed. Therefore extending more than 3.4% from the March highs and showcasing the ongoing uncertainty in market sentiment.

The currency pair currently encounters resistance at 1.0754. The subsequent upper barriers are nearing the 1.0792-1.0809 rate. It is a significant level at 1.0933/39. Potentially, it could cap near-term gains. On the support side, initial backing finds itself at 1.0654. Therefore, this aligns with the 61.8% retracement of the recent upward movement. Further support is at 1.0619, with a critical foundation at 1.0587/96, marking the low of 2023 and the 78.6% retracement level.

FOMC and ECB Decisions Loom; Traders Eye EUR/USD’s 1.0704 Pivot

This week is critical for the financial markets due to several key events:

  • The market expects the US Core PCE Price Index traders to gauge its implications for the Federal Reserve’s monetary policy.
  • The Federal Open Market Committee (FOMC) is on the way to making its interest rate decision. Thereby it is going to influence the USD’s strength, with the prevailing view that the Fed will maintain higher rates for an extended period.
  • The release of US Non-Farm Payrolls (NFP) could provide additional insights into the economic health of the US, further swaying market dynamics.
  • Speculations are rife about the European Central Bank (ECB) potentially starting to cut interest rates as soon as June, introducing additional complexity to the valuation of the Euro.

EUR/USD Tests 1.0704; Pitchfork Suggests Move to 1.0792-1.0809

As the EUR/USD tests a major inflexion point around 1.0704/12, a weekly closure above this level could signal the beginning of a more substantial recovery from the bear market. The currency pair’s near-term trajectory is particularly sensitive to shifts in market sentiment, especially as it remains just above the 1.0700 mark.

A descending pitchfork formation extending from the March high also influences the price action. If the currency pair can rise above the median line of this formation, attention will likely shift towards the resistance trend, with significant obstacles around the 1.618% extension at 1.30754 and near 1.0792-1.0809.

Monday EUR/USD Strategy: Preparing for US Inflation and ECB Moves

A strategy webinar is held each Monday at 8:30 am EST to analyse the EUR/USD technical setup thoroughly. This session is invaluable for traders seeking tactical advice to navigate through the complexities of the week’s market environment.

Traders are awaiting the Fed and ECB’s upcoming US inflation data and central bank decisions. This creates a delicate balance for the short-term outlook of the EUR/USD pair between hopes of recovery and the potential for renewed selling pressure. This week’s critical economic indicators will play a vital role in determining whether the recent upward trend can be sustained or if the market is set for a downturn.

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