EUR/USD could be in for a bumpy ride as the market opens this week. Traders are closely watching two major news stories that are shaking up the market, growing speculation around the US fed’s interest rate policy, and the latest reports on the eurozone economy and german inflation.
Speculation around US interest rates is setting the tone for the open. With rates held around 3.50% to 3.75%, traders are debating whether the fed will keep holding or push for another hike to fight sticky inflation. This hawkish sentiment is keeping the US dollar Index (DXY) strong and putting heavy pressure on EUR/USD right out of the gate. Meanwhile, upcoming eurozone GDP and german inflation data are keeping euro buyers cautious.
Looking at the daily chart, EUR/USD is currently stuck around 1.1369. The pair failed to break above the upper resistance zone at 1.1578 and is still trading under the 50 day moving average. This tells us sellers are still in control. If this daily support gives way, the price could easily drop further toward the 1.0984 level.
Zooming into the 1 hour chart, we saw a sharp dump last week from 1.1430 all the way down to 1.1370. Over the weekend, price just moved sideways near the lows. This flat consolidation shows that buyers haven't shown up with enough power to turn things around just yet.
The technical indicators are saying the same thing. Key tools like the RSI, MACD, and stochastic are all pointing to a sell signal. Even though a few indicators are starting to reach oversold areas, trend indicators like the ADX show that this downward momentum is still pretty strong.
My Opinion
Looking at everything from the rate speculation at the open to the daily chart signals, EUR/USD is definitely under pressure. The most logical approach right now is to wait for pullbacks to sell near upper resistance levels, targeting a retest of the strong support zone around 1.0980.
That said, with high impact fed news and euro economic data lined up mid week, watch out for sudden spikes in both directions. Keep your position size sensible and manage your risk carefully before entering any trades.
Source
⛔Disclaimer - This analysis is for educational purposes and reflects personal opinion only, not financial advice. Always practice risk management and use stop losses (SL) according to your own risk tolerance.
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