The euro is in a period of consolidation against the US dollar last as risk-on sentiment returns after major Chinese cities started to come out of draconian lockdowns.
This week the European Central Bank interest decision is likely to be the biggest market mover for the euro currency. Expectations are growing for a coming rate hike. The first in many years for the ECB.
Surging inflation in the eurozone and across with globe, coupled with a more pessimistic economic outlook narrows the window of opportunity to raise rates in the EU. Markets are expecting it.
July seems the appropriate time for the EU’s first-rate hike however, record inflation for May could justify a deeper conversation around a hastened end to asset purchases and potentially hiking as soon as next week.
The chances of this happening this week are actually quite low as ECB President Christine Lagarde has made every effort to telegraph actions of the ECB well ahead of time despite increasing pressure to act sooner rather than later.
Something that is good for the uptrend right now is that traders are not bullish towards the EURUSD at all. Sentiment is falling while the EURUSD pair looks higher.
The ActivTrader Market Sentiment tool shows that some 62 percent of traders are bearish towards the EURUSD. This is encouraging for more price gains this week and may even in June.
EURUSD Short-Term Technical Analysis
The four-hour time frame shows that the EURUSD pair has been trending sharply higher since the 1.0350 level, and has not reached the target of a large, inverted head and shoulders pattern.
The large, inverted head and shoulders pattern is in progress, and could reach the 1.0900 level. If we see a reversal back under the 1.0500 level then expect the 1.3000 support level broken this week, watch out for a further crash.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame things only look bad for the EURUSD pair has moved convincingly above the 2020 swing low, just or slightly above the 1.0500 level.
If the EURUSD pair continues to hold and moves under the 1.800 area this week, then watch for an attack towards the 1.0900 region or even towards the benchmark 1.1000 level.