The EURUSD currency pair shed 1.60% in the prior week as inflation worries returned to the global market’s theme. According to a survey of U.S. consumers, inflation expectations jumped to the highest in 12 years, supporting the Greenback’s strength in the prior week as treasury yields picked up steam.
However, the Greenback’s rout was capped as the U.S. printed more signs of a moderating economy. Year-on-year inflation came in lower than expected to kickstart the theme of moderation in the world’s biggest economy. The labour market showed signs of weakness, with unemployment picking up steam while consumer sentiment tapered off. Will the U.S. economy’s moderation boost the Euro?
The EURUSD was weighed down enough to signal a downtrend forming, with price action breaking below the 100-day moving average and trading in a descending channel pattern. The 1.09094 level, which acted as support prior to a high volume breakdown below it, now acts as resistance, while the 1.08292 level forms the low, which acts as support.
Given that the pair is trading at the descending channel support, with the confluence of support at the 1.08292 level and RSI conditions pointing to an oversold market, a reversal could come into play. If bullish traders commit to the move higher, the price could be directed towards resistance at the 1.09094 level.
Alternatively, if bearish traders remain dominant, the 1.08292 level could be a likely target if the price reverses from the present level or from resistance, supported by substantial volumes.
The broader market theme currently points to a bearish EURUSD market from a technical standpoint. However, the fundamental aspect points to weakness in the Greenback. The pair will likely move higher as the market embraces weakness in the U.S. economy. The 1.09094 level is probable, given that no bullish indicators support the Greenback this week.
Sources: Reuters, TradingView