The EUR/USD pair has been trading with a mild positive bias, reaching a two-and-a-half-week peak near the 1.0630 region. This positive movement can be attributed to several factors:
Weaker US Dollar (USD): The USD has been on the defensive due to reduced expectations for more interest rate hikes by the Federal Reserve (Fed). When interest rate hike expectations diminish, it tends to weaken the currency.
Positive Risk Sentiment: A positive risk tone in the markets has also contributed to the weaker sentiment surrounding the safe-haven US dollar. In times of risk-on sentiment, investors tend to move away from safe-haven assets like the USD, favoring riskier assets.
However, traders are exercising caution and refraining from aggressive bets due to the upcoming release of US consumer inflation figures. These figures can significantly influence expectations about the Fed's future rate-hike path and provide a fresh directional impetus for the EUR/USD pair.
From a technical perspective, the 1.0630-1.0635 region represents the top boundary of a descending trend channel that has been in place since a 17-month peak in June. If the EUR/USD pair can break above this channel, it suggests a short-term bottom may have formed, and the pair could extend its recent recovery from the year-to-date low of 1.0450-1.0445.
Key technical levels to watch:
Resistance Levels:
The 23.6% Fibonacci retracement level of the July-October decline is the first resistance, followed by the 1.0700 round-figure mark.
Beyond that, the 50-day Simple Moving Average (SMA) at 1.0740 and the 1.0765 region (38.2% Fibonacci level) are the next relevant hurdles.
Support Levels:
The 1.0600 round figure acts as immediate support, followed by the 1.0565 horizontal zone.
If the pair breaks below these levels, the weekly low around 1.0520 comes into play, and a convincing break below this could shift the bias in favor of bearish traders.
Further Downside: In the event of a significant bearish move, the EUR/USD pair may retest the year-to-date trough around the 1.0450-1.0445 region.
It's essential to keep an eye on economic data releases, central bank policies, and broader market sentiment as these factors can significantly impact currency pairs like EUR/USD.
Weaker US Dollar (USD): The USD has been on the defensive due to reduced expectations for more interest rate hikes by the Federal Reserve (Fed). When interest rate hike expectations diminish, it tends to weaken the currency.
Positive Risk Sentiment: A positive risk tone in the markets has also contributed to the weaker sentiment surrounding the safe-haven US dollar. In times of risk-on sentiment, investors tend to move away from safe-haven assets like the USD, favoring riskier assets.
However, traders are exercising caution and refraining from aggressive bets due to the upcoming release of US consumer inflation figures. These figures can significantly influence expectations about the Fed's future rate-hike path and provide a fresh directional impetus for the EUR/USD pair.
From a technical perspective, the 1.0630-1.0635 region represents the top boundary of a descending trend channel that has been in place since a 17-month peak in June. If the EUR/USD pair can break above this channel, it suggests a short-term bottom may have formed, and the pair could extend its recent recovery from the year-to-date low of 1.0450-1.0445.
Key technical levels to watch:
Resistance Levels:
The 23.6% Fibonacci retracement level of the July-October decline is the first resistance, followed by the 1.0700 round-figure mark.
Beyond that, the 50-day Simple Moving Average (SMA) at 1.0740 and the 1.0765 region (38.2% Fibonacci level) are the next relevant hurdles.
Support Levels:
The 1.0600 round figure acts as immediate support, followed by the 1.0565 horizontal zone.
If the pair breaks below these levels, the weekly low around 1.0520 comes into play, and a convincing break below this could shift the bias in favor of bearish traders.
Further Downside: In the event of a significant bearish move, the EUR/USD pair may retest the year-to-date trough around the 1.0450-1.0445 region.
It's essential to keep an eye on economic data releases, central bank policies, and broader market sentiment as these factors can significantly impact currency pairs like EUR/USD.
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