Decisive Moment for EUR/USD, But It Depends on the FED and ECB
EUR/USD used to be very bullish in the last four months but the outlook might have changed, as the economic data starts to improve in the US, which has pushed the terminal top for FEC rates above 5%. This means that the FED might keep raising rates a while longer than expected a week ago and keep them high for some time, which would be a bullish sign for the USD.
FED member Waller said yesterday that the job on inflation isn’t done and this might be a ‘long fight’. ECB’s Knot sees first signs of tightening in the housing market and credit for housing, although he added that they have more ground to cover than the FED, which is a bullish comment for EUR/USD.
EUR/USD surged above 1.10 after the FOMC meeting last Wednesday, with Chairman Powell mentioning rate cuts if the data supports them. But made a strong bearish reversal On Friday as the US data showed a bounce in some sectors, which removes recession fears.
EUR/USD fell below 1.07 and it broke the 200 SMA (purple) on the way, which used to be the last line of support for this pair during the uptrend. Now that moving average, as well as the 20 SMA (purple), have turned into resistance on the H4 chart above.
EUR/USD Daily Chart – Sellers Testing the 50 SMA
A bullish reversing pattern is forming on the daily timeframe
But, on the daily chart, the trend is still bullish and this latest bearish move which has lasted for about a week looks more like a due retrace before the next bullish move higher. The retreat seems to be complete as the stochastic indicator is oversold on this timeframe. So, there is a chance that we might see a bounce from here, although Tuesday’s doji candlestick which is a bullish reversing signal, wasn’t followed by a bullish daily candlestick yesterday. I suppose markets are waiting for more facts from the economic data to see where the FED and the ECB will head next.
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