With four consecutive weeks of declines in the books, the EURUSD currency pair opened the new week on the back foot, sliding nearly 15 basis points lower.
The Greenback’s recent strength has been highlighted by its resilient labour market and sticky inflation, which have boosted it on the back of interest rates potentially staying higher for longer. Nearly two weeks ago, the U.S. reported Nonfarm payrolls of 187K, which ticked higher compared to the prior month’s reading of 185K, suggesting that the labour market remained quite resilient. In addition, July’s inflation picked up steam by 20 basis points compared to June, indicating that the economy still has some way to go before reaching the Federal Reserve’s 2% target.
Of late, the EURUSD currency pair has been subdued as it retreated from the 1.12757 level, which forms resistance, crossing below the 100-day moving average, signifying a downtrend formation. The pair remained buoyant, just above the support level of 1.08392, after crossing below the 61.80% Fibonacci Retracement Golden Ratio level.
With the Relative Strength Index pointing to oversold conditions, downside momentum stalled, opening the door to some upside momentum as the market failed to drive the pair towards support. An ascending channel pattern is now unfolding with a minor support and resistance at the 1.09289 and 1.10595 levels, respectively.
Given that the pair trades at the minor support level of 1.09289, a reversal could play out. If momentum sways in favour of the upside, the 1.10595 level could come into play. Alternatively, a high volume breakdown below the 1.09289 level could prompt a move lower. In this case, the 1.08392 level will likely be earmarked as a level of significance to the downside.
This week, traders will be anticipating the Euro Area GDP growth rate and official inflation rate data. Given that the region entered a technical recession, traders will likely be interested in knowing whether further economic weakness abounds, while inflation data provides hints of whether the European Central Bank’s hawkishness will be ongoing. The key level to monitor at present will be the 1.09289 level, as bullish or bearish sentiment will probably pivot off the level.
Sources: Reuters, TradingView
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