The EURUSD Defies Gravity As The Euro Gains, Despite Lower Euro Area Inflation

The Euro surprised to the upside in Thursday’s trading session after gaining 0.68% on the Greenback, defying the odds.  

Euro Area inflation cooled, with German inflation dropping to the lowest level in over a year. France, Spain and Italy’s inflation followed suit, indicating that the European Central Bank’s steep interest rate hikes have not been in vain. However, the EURUSD currency pair gained, despite bearish European data prevailing. Boosting the pair were comments about a potential pause in rate hikes by key figureheads in the Federal Reserve. The market immediately priced in an 80% chance of a pause in the upcoming interest rate decision, leading to a surge in risk appetite.  

Technische Analyse 

The EURUSD currency pair’s downtrend is likely under threat following the high volume breakout above the descending channel pattern and resistance. Support at the 1.06356 level was sharply rejected prior to the bullish surge, while the breakout above the pattern was in confluence with a breakout above resistance at the 1.07122 level and the 61.80% Fibonacci Retracement Golden Ratio level.  

Following the surge in price, bullish traders could be in contention to cover some lost ground, with the breakout above the Golden Ratio indicating that there is still some appetite for the upside. The 1.08288 level could come into play if bulls commit to the move higher.  

Alternatively, a reversal could play out if bullish volumes subside, indicating that momentum is dying out. Bearish traders will likely earmark the 1.07122 level, which now serves as support, as a point of interest if supply outweighs demand.  

Zusammenfassung 

Traders will likely be eyeing today’s U.S. Non-Farm Payrolls for signs of a rate hike ahead. If the labour data surges far beyond expectation, the Greenback could be boosted by a higher possibility of further tightening. The 1.07122 level will likely play a pivotal role in defining market sentiment. A breakdown below the level on high volumes could signal bearish intentions of the market, while it could also support the pair if the Greenback falters.  

Quellen: Reuters, TradingView