The EURUSD held to gains steadily for the 2nd day as the week comes to a close. The pair is currently in recovery following a plunge to the weekly close due to a banking sector turmoil. The sentiment for the EURUSD improved following a 50bps hike by the ECB and reassurance by the ECB’s President Lagarde on the security of banks in the Euro-Area.
The US negative retail Sales and PPI data released earlier this week fuelled risks on the US dollar. Retail Sales fell to -0.4% vs -0.3% anticipated while PPI data dropped to -0.1% vs 0.3% surveyed. Moreso, the US banking crisis left investors on the run as it induces recession fears.
However, a break below the 1.0500 level could trigger selling pressure towards the 1.0200 level as ECB failed to provide forward guidance for the market. The Eurozone CPI data softened to 8.5% against a previous 8.6% and gives less pressure for further tightening on the ECB.
Traders should focus more on the upcoming, data from the US market. The Michigan Consumer Expectation and Consumer sentiment at the end of the week. Next week, there will be US housing data, interest rate projections and German Manufacturing Data.
Weekly Chart Analysis
The EURUSD is recovering gains after slamming towards the 1.0500 level. Bulls have been retracing from the 1.1000 level and holding above the 1.0500 could present opportunities for a further rally towards the 1.1150 level, a previous support-turned-resistance. The RSI indicator reading is currently trading above the 50.00 neutral level suggesting that bulls could be anticipating a rally above that yearly low.
However, a break below 1.05000 could cause further selling towards the 1.0200 near-term resistance-turned-support. The 1.0500 support coincides with a Bollinger Band baseline and a successful break below that level could give bears an upper hand.
The ActivTrader Sentiment indicator suggests that 64% of Retail Traders are bullish on the EURUSD. Traders could be seeking a rally from the yearly support level as supported by ECB’s hawkish tone. ECB’s President Lagarde doubled down on bringing rates to normalization and gave assurance to EU banks on the availability of liquidity.
However, upside gains could be limited following a drop in the Eurozone Inflation print early Friday. The strong data from the US could also see EURUSD giving up is short-term gains as Initial Jobless Claims dropped to 192K vs 205K anticipated suggesting there could be more room for the Fed to consider further tightening.
Daily Chart Analysis
The EURUSD is currently rangebound between the 1.1000 high and the 1.0500 low. Traders should expect a price breakout from the near-term range. Price is now sitting at a yearly low and a break below that level could trigger selling pressure towards the 1.0200 level, a previous resistance-turned-support. On the upside, gains remain limited by the 1.0650 level coinciding with a Williams Alligator tool. The Williams Alligator indicator suggests that the pair could experience a breakout as moving averages moves closer to each other.
However, a close above 1.0650 could trigger bullish momentum towards the 1.10000 yearly high. The MACD indicator suggests that there still is some bullish interest as volume bars steadily hold above the 0.000 benchmark. If the 1.10000 fails to hold, further upside should be expected and the near-term barrier is at the 1.1150 level.