EUR/USD is making gradual gains, reaching a two-and-a-half-week high at 1.0630 as the US Dollar weakens. The greenback is under pressure due to diminishing expectations of further interest rate hikes by the Federal Reserve (Fed). This is further bolstered by a positive risk sentiment in the market, diminishing the appeal of the safe-haven currency. Forex traders are watching these developments closely as they weigh their positions ahead of the US Consumer Price Index (CPI) release, which is expected to influence the path of future Fed rate hikes.
From a technical standpoint, the EUR/USD pair is testing the top boundary of a descending channel that has been in place since June, located in the 1.0630-1.0635 range. This zone is closely followed by the 23.6% Fibonacci retracement level of the July-October steep decline. A sustained breakthrough could indicate the formation of a short-term bottom, potentially extending the recent recovery from the year-to-date low of 1.0450-1.0445. Forex traders are monitoring these key levels for potential buy or sell opportunities.
As daily chart oscillators begin to show positive momentum, EUR/USD might aim for the 1.0700 level, unattained since September 20. The pair could extend gains toward the 50-day Simple Moving Average at 1.0740, with further resistance around 1.0765, representing the 38.2% Fibonacci retracement level. However, traders remain cautious due to speculations that the European Central Bank (ECB) may not be considering further rate hikes, which could cap further upside potential.
On the downside, 1.0600 now acts as immediate support, followed by the 1.0565 horizontal zone. These levels are significant for Forex traders looking for potential entry or exit points. Below that, the weekly low at 1.0520, triggered by an incident in the Middle East, becomes a crucial support level. A convincing break below 1.0520 could shift the bias in favor of bearish traders, pushing the pair below the psychological 1.0500 mark and towards retesting the year-to-date low.
The EUR/USD pair's current dynamics highlight the interplay between global economic factors and Forex trading. The weakening US Dollar and the uncertainty surrounding the Fed's rate hike path are key drivers influencing currency markets. Forex traders are closely watching these developments as they assess their positions and evaluate potential trading opportunities. The upcoming US CPI report holds the key to future market movements and the direction of the EUR/USD pair. In this ever-evolving Forex landscape, staying informed and adaptable is essential for traders to make informed decisions and manage their portfolios effectively.