The Greenback has been on a roll after breaking through low after low in its relationship with the EURUSD currency pair. The Debt Ceiling crisis has resulted in the market favouring safe-haven assets over risk assets, leading to the EURUSD currency pair’s free fall.
The FOMC Minutes signalled that the Fed officials are leaning more toward a pause, with a data-dependent approach required to validate future hikes. In yesterday’s economic reports, the U.S. Labour Market showed resilience, with unemployment ticking lower slightly, while GDP grew 1.3% for the quarter. The market has priced in a higher probability of a Fed rate hike, up to 42.3%, from 17.4% a week ago, bolstering the Greenback, as a stronger U.S. economy goes against the Federal Reserve’s goal of reducing inflation.
The EURUSD currency pair has sustained a downtrend within a descending channel pattern while the price has fled from its 100-day moving average. Support and resistance were established at the 1.07122 and 1.08292 levels, respectively.
After reaching its 62-week low at the support level, a minor rejection occurred. If the rejection of support holds, bulls could be looking to the 1.08292 level as a potential target. A high volume breakout above the descending channel’s resistance could validate a move higher.
In contrast, a high volume breakdown below the support level could expose the pair to further downside price action. Bearish traders will likely earmark the 1.06356 level as a point of interest.
The Greenback could be further bolstered by an upside surprise to the Core PCE Index, the Fed’s preferred inflation gauge, set to be released today. However, if inflation slows, the EURUSD could be supported, with the 1.07122 level likely to hold in the short to medium term.
Sources: CME, Reuters, TradingView