The turbulent week for the US Dollar continued during Tuesday’s trading session as weak economic data in the US swung the pendulum towards a potential interest rate hike pause from the Federal Reserve, helping the EURUSD higher while pushing the Dollar Index towards its’ nine-week low.
The US job openings fell close to the lowest levels in almost two years and boosted the notion among investors that the Fed may be nearing the end of the monetary tightening policy, with the FedWatch Tool suggesting that the percentage of investors expecting a rate pause grew to 57.9% from 42.8% the day before. Investors will look to the non-manufacturing data later today as another hurdle that the greenback needs to overcome before the main event, the dance with the Nonfarm Payroll data on Friday.
Technical
The 4H chart shows that the recent macroeconomic data that has weakened the greenback pushed the currency pair, also known as the Fiber, above a psychological level of 1.09304. The breakthrough above the psychological level brought the resistance level at 1.09964, a level of interest for the bulls, into play. A sustained breakthrough above the resistance level would entice the bulls to push the fiber rate above the next resistance level of 1.10043, a fraction of the major resistance level at the 1st of February 2023 high of 1.10329.
The bears could be hoping the appearance of the red candles in the recent rally as signs of the bulls losing grip and could signal a reversal rather than a pause. Thus, if the price action moves below the psychological level, the bears could look to the breakthrough below the support level of 1.08866, a level of interest for the bears, to confirm bearish momentum. A breakthrough below 1.08866 could leave the 1.08524 support level and the 50-day moving average at the mercy of the bears.
Summary
With major central continuing with their respective monetary policy tightening, a pause by the Federal Reserve could heavily impact the greenback’s attractiveness. However, if the US economic data continue to show that economic activity is slowing, the market could expect the Fiber to continue threading higher, and investors could find an opportunity as the Fiber rate breaks above the 1.09664 and the 1.10043 resistance levels.
Sources: TradingView, Reuters.
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