The euro currency recovered back above the technically important 1.1900 level against the US dollar last, as the pair reached the 50 percent Fibonacci retracement of the March 3rd swing-high, around the 1.1920 resistance level.
Dovish meeting minutes from the FOMC and a down beat speech from Federal Reserve Chair Jerome Powell all contributed to the notion that the US central bank will need to continue printing money and keep rates lower for longer.
A shift was also underway in financial markets thinking last week as US weekly jobless claims rose sharply for the second straight week. This week promises to be pivotal for the EURUSD pair, as the US economy releases CPI inflation, retail sales data, and the next round of weekly jobs data.
If all data points come in hot then we should expect US dollar selling to stop and the greenback to strengthen. However, if we see depressed inflation and sub-par retail sales and jobs data then US dollar bashing is likely to continue.
It is certainly worth pointing out that geo-political risks are simmering in the background, with Chinese and Taiwan tensions rising, and the US threatening to send troops to aid a stand-off between the Ukraine and Russia. These two political hot potatoes could easily be resolved, but they are very much worth watching in case they do escalate.
The COVID-19 vaccine rollout is underway across the eurozone now, and this could be another reason why the euro currency is starting rally. Traders may be factoring in a summer rally in the single currency.
It is worth noting that the recent CFTC commitment of traders report showed that futures traders continue to trim bearish bets towards the euro currency. This has been an ongoing trend over recent weeks.
Looking at retail positioning, the ActivTrader Market Sentiment tool shows that some 80 percent of traders are bearish towards the euro right now. Bearish sentiment has increased significantly, and we should expect the short squeeze to continue while this remains the case.
EURUSD Short-Term Technical Analysis
According to the four-hour time frame the 1.1910 level is extremely important this week. This key technical area is the 50 percent retracement of the yearly low to the March 3rd swing high.
Additionally, this is the location the pair’s 200-period moving average on the four-hour time frame. Gains above this area and the EURUSD pair could rally towards the 1.1940 and 1.1970 level this week.
Should the EURUSD get rejected from this area then we should see the pair slammed down towards the 1.1800 support zone, and possibly much lower.
EURUSD Medium-Term Technical Analysis
Another very important point to make on the technical front is that the EURUSD pair closed the week above its key 200-day moving average, around the 1.1890 level, which is an important event on the chart.
EURUSD traders should expect a battle around this key price zone in early-week trade, and one which should decide the direction of the pair over the medium-term.