Now trading 3.72% off its 2023 highs, the EURUSD currency pair has been subdued by growing hawkish fears, especially in the U.S. Despite the U.S. and Eurozone fighting the same battle against inflation, U.S. sentiments far outweigh those of the Eurozone on the currency pair.
The greenback has recently found strength supported by rising treasury yields, with the 10-Year Yield reaching a three-month high this week. Traders will look to today’s Eurozone inflation data and the U.S. labour market report for cues on whether the economic conditions will prompt further tightening of policy by the respective central banks.
The EURUSD recently experienced a selloff which is now slowing down, forming a consolidation in a falling wedge pattern on low volumes. Support and resistance currently stand at the 1.06125 and 1.07041 levels, respectively.
Bears might be interested in continuing on their journey following a breakout of support into the lower end of the falling wedge channel. Should price break below the lower trendline, price will probably be driven lower toward the 1.05326 level based on the Fibonacci extension golden ratio at 61.8%.
Alternatively, if bulls look to respect the pattern, price is likely to be driven up from the falling wedge’s support to the nearest resistance at the 1.06622 level.
If Eurozone inflation comes in higher-than-expected, bulls will probably find a reason to act on the pair with greater conviction in the short term. Alternatively, bulls will be challenged in their position if the U.S. Labour market reports show resilience.
Sources: Reuters, TradingView