On Monday, the EUR/USD currency pair hovering about 1.1750, showing a phenomenal rebound on the back of rising euros’ fortune. As the market anticipates significant economic reports from the United States this week, including the highly anticipated Nonfarm Payrolls (NFP) report on Tuesday and Consumer Price Index (CPI) figures on Thursday, movements in the currency pair reflect investor sentiment and expectations.
The data coming out over the next couple weeks will be pivotal for assessing the health of the US economy. The NFP report will provide insights into employment trends, while the CPI figures will help assess inflationary pressures. These indicators are critical for all market participants and the Federal Reserve’s monetary policy transition is being watched very carefully right now.
Of all the major currency pairs, the EUR/USD has shown the most definitive signals in technical analysis. The 20-period Simple Moving Average (SMA) has surged above the 100- and 200-period SMAs. This northward movement is a definitive sign of bullish momentum for the currency pair. At the time of writing, EUR/USD is sitting above all three moving averages with the 20 SMA at 1.1719 giving immediate support. The 100 simple moving average (SMA) is at 1.1627, adding further bullish bias to the mix. The 100-day SMA is at 1.1644.
Market analysts point out that with all these positive technical indicators, EUR/USD is set to take a run at its December highs. The prevailing mood of optimism surrounding the euro is palpable. One important momentum indicator backs up this hot trend, as it remains above its midline and continues rising to greater heights. The Relative Strength Index (RSI) for the pair is at 67 right now. It is forecast to trend modestly higher and likely soon breach the 70 level.
After some recent volatility, the US dollar has begun to recover some strength. It cut a good chunk of its losses in the first half of the day. Yet this recovery looks tenuous as traders are still wholly focused on the next data point that could change the winds in this market. The interplay between US economic performance and monetary policy will be pivotal in determining future movements in the EUR/USD exchange rate.