The European Central Bank (ECB) President Lagarde remained hostile towards inflation in a speech on the last day of trading in the prior week. The ECB suggested that interest rates would likely be kept higher for longer, hinting at the possibility of further tightening ahead.

The Euro was under pressure last week as traders turned bullish on the Greenback over hopes that the Debt Ceiling negotiations were progressing, limiting the likelihood of the world’s biggest economy defaulting on its outstanding debts. The EURUSD currency pair shed 40 basis points last week, indicating the market’s confidence in the Greenback.

Technical

The EURUSD currency pair has pointed lower, with the price trading through a descending channel pattern and fleeing from its 100-day moving average. Support and resistance were established at the 1.07122 and 1.08292 levels, respectively.

After establishing the week’s low, traders sent the pair higher towards the resistance level at 1.08292, where the price is in confluence with the resistance of the descending channel pattern. If the horizontal and diagonal resistance is respected, a reversal is likely. Bearish traders could earmark the 1.07122 level as a point of interest should the pair decline.

Alternatively, a high volume breakout above the 1.08292 level could indicate the market’s intention to bolster long positions on the Euro at the expense of the Greenback. If a breakout above the level ensues, bullish traders will likely aim for resistance at the 1.09094 level.

Summary

The FOMC Minutes, U.S. Labour Market Reports and PCE Index, the preferred inflation gauge of the Federal Reserve, will likely drive market sentiment this week. U.S. unemployment is expected to pick up steam while inflation remains flat and sticky. If weakness in the U.S. labour market and inflation prevails, another rate hike by the Federal Reserve could become less likely, considering that traders are currently wagering a near 90% chance of a pause. The hawkish stance of the ECB could potentially support the Euro, making the 1.08292 level and above probable.

Sources: Reuters, TradingView