The Euro-dollar currency pair recovered some of its intraday losses during the European session on Tuesday, but remains in negative territory, hovering around 1.0850. The US Dollar (USD) strengthened against the Euro (EUR) on the improved sentiment of risk aversion.
The EURUSD pair could find immediate support around the nine-day Exponential Moving Average (EMA) at 1.0832. A break below this level could put downward pressure on the pair to test the psychological support at 1.0800 aligned with the previous week’s low at 1.0795. Further support appears at the major level of 1.0750, if the pair surpasses the latter.
Technical analysis indicates a bullish sentiment for EURUSD. The 14-day Relative Strength Index (RSI) is positioned above the 50 mark.
Moreover, the Moving Average Convergence Divergence (MACD) exhibits a divergence above the signal line and lies above the centerline. While a lagging indicator, this suggests a confirmation of the bullish momentum for EURUSD.
On the upside, the immediate resistance levels are identified at the 38.2% Fibonacci retracement of 1.0864. A break above this level could exert support for the pair to revisit February’s high at 1.0897, in conjunction with the psychological resistance at 1.0900.
ING: support above 1.0800
Economists at ING said the EURUSD pair remains supported above 1.0800.
“We do fear that EUR/USD has a little downside later this week on Thursday’s European Central Bank risk.
“We see risks of a weaker Euro as the ECB lays out the conditionality of a June rate cut. Combined with Fed speeches this week, our bias is that EUR/USD ends the week near 1.0800.
“The Eurozone data calendar is light on Tuesday, and we doubt the January PPI release is a market mover,” the ING economists said.
Traders now seem reluctant and prefer to wait for this week’s key central bank event risks before placing aggressive directional bets, which, in turn, leads to the EURUSD pair’s subdued range-bound price action.
Federal Reserve Chair Jerome Powell’s congressional testimony on Wednesday and Thursday will be looked upon for cues about the rate-cut path. This, along with the ECB monetary policy decision on Thursday, will help in determining the near-term trajectory for the currency pair.
Apart from this, investors this week will confront the release of important US macro data scheduled at the beginning of a new month, including the closely-watched monthly employment details, or the nonfarm payrolls (NFP) report on Friday.
In the meantime, reduced bets for rapid interest rate cuts by the ECB continue to act as a tailwind for the shared currency. The US Dollar (USD), on the other hand, is undermined by expectations that the Fed will start cutting rates in June and lends support to the EUR/USD pair.
(Source: OANDA)
