Key Takeaways:
- EUR/USD has rebounded above 1.1100 due to a weaker US Dollar and hawkish ECB expectations.
- Key resistance lies at 1.1160, with potential to test 1.12 if upward momentum continues.
- A drop below 1.1100 could see support levels around 1.1040-1.1030.
- US Federal Reserve’s upcoming interest rate decision is expected to be a major driver of market volatility this week.
- Eurozone and US economic data will provide further direction for the EUR/USD pair.
Market Dynamics and Recent Performance
Over the past week, the EUR/USD pair experienced a recovery after initially falling in the early part of the week. The Euro bounced back, recovering from earlier losses due to hawkish sentiment from the European Central Bank (ECB), which offset some of the downward pressure. The Euro’s resurgence was supported by expectations around the Federal Reserve’s upcoming interest rate decision, which is expected to play a critical role in market movements in the coming days. By the end of the week, the EUR/USD pair found itself climbing above 1.1100, supported by a broad-based weakness in the US Dollar. The ongoing selling pressure on the Dollar comes amid increased speculation over a rate cut by the Federal Reserve in its upcoming policy meeting.
Technical and Fundamental Influences
From a technical perspective, EUR/USD showed signs of bullish momentum, breaking above key resistance levels near 1.1100. The pair has continued to find support at these levels, and if it maintains momentum, it could test the 1.12 mark. If EUR/USD falls back below the 1.1100 mark, the next support level is likely around the 1.1040-1.1030 range. The Relative Strength Index (RSI) is currently above 60, indicating the pair’s bullish bias, while price action remains above the 100-period Simple Moving Average (SMA), suggesting further upward potential.
On the fundamental side, economic data from both the Eurozone and the United States will be pivotal in determining the direction of EUR/USD. European economic releases, including the Consumer Price Index (CPI) and the ZEW business sentiment survey, are likely to provide short-term influences. On the other hand, US Retail Sales data and the Federal Reserve’s interest rate decision will dominate headlines later in the week. Softer inflation data from the US and expectations of a larger rate cut have added pressure to the Dollar, with markets pricing in a high likelihood of aggressive policy easing.
Looking Forward
Looking ahead, the market will focus heavily on the Federal Reserve’s meeting, which is expected to set the tone for the week. Any surprise in the Fed’s decision or commentary could cause significant volatility in the EUR/USD pair. Should the Fed cut rates by more than expected, this could further weaken the Dollar, allowing the Euro to continue its upward momentum. Conversely, if the Fed delivers a more neutral or hawkish tone, the US Dollar could regain strength, pushing the EUR/USD pair lower.
Moreover, market participants will keep an eye on key economic indicators from both sides of the Atlantic. While the Euro has shown resilience in recent sessions, further economic data from the Eurozone could either reinforce or limit this bullish sentiment. Trade balances, inflation data, and labor costs will likely provide a clearer picture of the health of the European economy.
