The EURUSD currency pair opened the week flat, continuing its sideway consolidation as bulls and bears battle for supremacy. The pair gained 0.68% last week as appetite for risk returned to the market, following the banking sector cleaning up after itself, restoring calm in the market.
This week traders will look to the Euro Area Inflation and U.S. PCE Index (the preferred gauge of inflation for the Federal Reserve) for direction on where the market will likely place its faith. A higher inflation reading in Europe or the U.S. could boost their respective currencies as higher interest rate expectations feed into an appetite for a higher-yielding currency and bond market investments.
The EURUSD currency pair paused its uptrend following price breaking below the ascending channel pattern. Support and resistance were established at the 1.06568 and 1.09318 levels, respectively.
With the price currently consolidating sideways, forming a rectangle pattern, a breakout to either side of the pattern could prompt an extended move in the direction of the breakout. If price breaks out above the consolidation pattern resistance, at the 1.07843 level, on high volumes, bulls will likely be looking to take the pair toward the 1.09318 level.
Alternatively, if a high volume breakout below the consolidation pattern support at the 1.07473 level occurs, bears will likely be interested in lowering the pair, with the 1.06568 level earmarked as a potential level of interest.
With the European Central Bank (ECB) committed to fighting inflation, another jumbo-sized rate hike could be in the cards. The ECB’s next rate hike will likely support the Euro if implemented. Traders now expect a 74.5% chance of the Federal Reserve pausing interest rate hikes. The Greenback will probably lose its footing against the Euro if a pause is implemented.
Sources: Insider, CME FedWatch Tool, TradingView