This morning, Euro holders will be delighted after the EURUSD currency pair gained 0.57% in the Asian session trading. The greenback found weakness after traders bet on a 97% chance of a Fed rate hike of 25 basis points in place of the 50 basis point hike which was baked in last week.   

The U.S. 2-year treasury yield experienced its sharpest two-day drop since the 2008 Financial Global crisis on Friday, following a mixed U.S. Labour market report which showed growth in employment and moderate wage growth. In addition, after the second-largest U.S. bank failure since 2008, traders assumed the possibility of a lower rate hike in March as the Fed might be inclined to pause since the current environment has strained the banking system and its existing fixed-income investments. 

However, all eyes will be on this week’s U.S. CPI, Euro Area Interest Rate decision and inflation for cues on where the currency pair is most likely headed.  

Technical

The EURUSD downtrend is seemingly over, following a breakout above the 100-day moving average and, subsequently, the resistance level. Support and resistance were forged at the 1.06906 and 1.07898 levels, respectively.  

Following the breakout, bullish traders will likely look to the 1.07898 level with interest as a take-profit level. Alternatively, if bullish momentum fades with declining volumes to the upside, bears will likely look to enter the market with the 1.06906 level earmarked as a potential target. 

Summary

With the banking sector currently vulnerable to the contagion caused by the big collapse, more emphasis will be placed on tomorrow’s CPI release to determine if an interest rate hike above 25 basis points is warranted.  

Sources: Reuters, Moneyweb, TradingView