After an overnight pullback from a two-week high, dip-buyers have emphasized the bullish EUR/USD currency pair. It has maintained its rebound above the 1.1600 level for most of Tuesday’s first half, European session. This movement comes in the face of a paradox of mixed economic data. Market participants are especially focused on the monetary policy outlook from the European Central Bank (ECB) and the U.S. Federal Reserve.
In fact, aside from a few trading days since late October, the EUR/USD pair has struggled to find any upward momentum. The 100-day Simple Moving Average (SMA) has proven to be a significant resistance area. That’s the problem, market participants are in a fearful mood today. This follows the pair’s November plunge to a three-month low, falling to the 1.1470-1.1465 area.
In such a scenario, if the EUR/USD pair slips below the psychological mark of 1.1500, it will continue to be at risk of re-testing the 1.1470-1.1465 area. Should the pair close below this level, this may be a sign of further downside. Analysts believe it could even retest below 1.1400, potentially the swing low posted in August.
Should the duo reclaim the 1.1700 psychological barrier, it would expose further room for an ascent. Such a development could take them in the direction of 1.1760-1.1765 supply area. A consistent upward trajectory would require more than mere technical indicators; it would depend on external factors such as economic releases and central bank policies.
The EUR/USD currency pair continues to flourish on a predominantly positive risk tone for the time being. Daily chart oscillators are beginning to build upside momentum and gather positive traction. Traders are looking ahead to the next round of economic reports. They’re especially laser-focused on the U.S. Personal Consumption Expenditure (PCE) Price Index, the index scheduled to be released this Friday. This data can have a major impact on overall market sentiment and thus be a potential catalyst for driving the EUR/USD pair’s movements.
According to market speculation, this makes a cut of the ECB’s rates almost impossible by the middle of next year. This expectation might offer some underlying support for the euro in the short term. This expectation is a really important thing. It sharply contrasts the weak incoming economic data, indicating that growth in the U.S. economy is slowing and weighing negatively on dollar strength.
Additionally, should the EUR/USD pair experience a slide below 1.1600, it may attract buyers near last Friday’s swing low around the 1.1555 region. This may be an important inflection point where traders should position themselves to take advantage of potential reversals or continued downside.