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The EURUSD pair is trading back towards the 1.0500 level after the greenback failed to build upside momentum ahead of the Federal Reserve and ECB meeting this week.
Many investors and traders believe that the FED could be the main market mover, however, the ECB meet is equally as important in my important given the economic situation is the eurozone.
The 75-basis point increase at the October meeting was supported by a “very large majority”, with some members expressing a preference for 50 basis points increase given the potential financial stability and economic activity ramifications of an “overly aggressive pace of tightening.”
This time around, a downshift to a 50-basis points increment is expected by 45 of the 62 economists surveyed by Reuters, while market pricing assigns an approximately 87% chance to such a move.
With the both the ECB and the FED offering rate hikes of equal amounts it will likely come down to just how hawkish or dovish the respective policy statements are this week.
Sentiment is also starting to turn lower, which is a bad sign for bears. Bearish sentiment has increased since last week, despite the rise in the EURUSD.
The ActivTrader Market Sentiment tool shows that 68.2 percent of traders are bearish towards the EURUSD. This sentiment metric is not at peak euphoria, but enough to drive the euro higher.
EURUSD Short-Term Technical Analysis
The four-hour time frame continues to show that the EURUSD pair is testing towards the best levels in months, meaning that upside risks are building.
Further gains above the 1.0600 level would likely see more gains towards the 1.0800 level as bullish momentum grows. The 1.0600 level is also a solid bearish swing area for EURUSD traders to target 1.0300.
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EURUSD Medium-Term Technical Analysis
Looking at the daily time frame, we could likely see a final test of rising wedge resistance this week if bulls gain traction above the 1.0600 level.
If the EURUSD pair continues to hold above the 1.0600 level, then a move to the 1.0800 area could happen this month. Any weakness sustained under the wedge could spell heavy losses for the EURUSD pair.
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