EUR/USD Technical Analysis: Eyes on ECB Rate Decision

EUR/USD Remains Under 1.0600 Barrier with Key Support at 1.0566

The EUR/USD pair is maintaining its position below the critical 1.0600 level as the new trading week begins. All eyes are now on the European Central Bank (ECB) Interest Rate Decision scheduled for Thursday, with market expectations leaning towards no rate change. However, it’s believed that the ECB’s rate hiking cycle may have concluded, and potential easing is unlikely until at least July 2024 as the battle against surging inflation persists. As of the latest data, the major pair is trading down 0.15% on the day at 1.0577.

Range-Bound EUR/USD Technicals Suggest Potential Upside

From a technical perspective, the EUR/USD pair continues to display a range-bound pattern on the four-hour chart. Currently, it remains above both the 50- and 100-hour Exponential Moving Averages (EMAs), suggesting potential for further upward movement.

A key resistance level is in the 1.0600-1.0610 region with the convergence of the upper Bollinger Band boundary, a psychological round number, and a peak from October 20. A decisive breakthrough of this level could pave the way for a rally towards the next resistance at 1.0635 (high of October 11). Further resistance points to observe include 1.0671 (high of September 22) and 1.0735 (high of September 20).

Caution in the Markets as EUR Swap Rates Strengthen

The EUR/USD pair showed strength as it touched the 1.0600 area on Monday. However, the market mood remains cautious, which might limit the pair’s potential for further gains.

Rising US 10-Year Bond Yields Influence EUR/USD

In a development in the market, the benchmark 10-year US Treasury bond yield has been rising, approaching 5% early on Monday after experiencing a 1.5% decline on the previous Friday. If the 10-year yield convincingly surpasses the 5% mark, it could offer additional support to the USD in the near term.

Data and ECB Announcement to Shape EUR/USD Movement

Market participants are closely monitoring key economic data releases scheduled for the week. Of particular significance are the S&P Global PMI surveys from Germany, the Eurozone, and the US. Additionally, the European Central Bank (ECB) will announce its monetary policy decisions on Thursday. These events are expected to influence market sentiment and subsequently impact the trajectory of 1 EUR to USD.

EUR/USD Technical Analysis

In the technical analysis, the Euro to Dollar remains above the ascending trend line originating from early October. Furthermore, the Relative Strength Index (RSI) indicator on the 4-hour chart stays above 60, indicating a prevailing bullish bias.

1.0600 is a pivotal point in the technical outlook, coinciding with the location of the 200-period Simple Moving Average (SMA). If EUR/USD manages to confirm this level as support, it could open the path to potential bullish targets, including 1.0640 (Fibonacci 38.2% retracement) and 1.0700 (Fibonacci 50% retracement).

Conversely, strong support remains steady in the range of 1.0570-1.056. It is encompassing the 50-period SMA, 100-period SMA, and Fibonacci 23.6% retracement. This is followed by the support at 1.0540, which includes the ascending trend line and a static level. Further downside potential leads to the psychological level of 1.0500 and the static level at 1.0450.

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