Euro, EUR/USD Talking Points:
- It was an indecisive week for EUR/USD on the heels of the breakdown from the week before. A big spot of support came into play on Tuesday at 1.0611, and that helped to hold the lows into the end of the week.
- The weekly bar in EUR/USD is showing as a spinning top, which illustrates indecision like a doji; but the longer-term backdrop remains a range with another key spot of support just a little lower, around the 1.0500 psychological level.
- For next week, the Fed is in a blackout-period ahead of the May 1st rate decision and Core PCE data is released on Friday. Early-week drive will likely emanate from U.S. and European rate expectations which can still be nudged by comments from European Central Bank members, or U.S. data items such as Durable Goods (Wednesday) or Q1 GDP (Thursday).
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It was an indecisive week for EUR/USD and that can be read in a couple of ways. Indecision after a large move can often hint at pullback or possibly even reversal potential. But it can also be a simple pause point in a larger trend, particularly when a big level of support comes into play that motivates profit taking from those that were riding the trend. The question that matters after the support test is how aggressive sellers will remain to be.
The support showed in EUR/USD this week when the pair pushed down to a key Fibonacci level on Tuesday, and that helped to hold the lows into the latter-portion of the week. Another flare from bears on Friday morning pushed prices down again, but this time it held as a higher-low, with support showing right at 1.0611.
EUR/USD Two-Hour Price Chart
Chart prepared by James Stanley, EUR/USD on Tradingview
EUR/USD Bigger Picture
The 1.0611 level comes from a Fibonacci retracement that’s had several interesting items. Last year, the high printed right at the 61.8% retracement from that same major move. And in the month of March, when EUR/USD bulls were driving, trying to re-test the 1.1000 handle, it was the 50% mark of that major move at 1.0943 that built a series of lower-highs until bears were ultimately able to claw back control.
This is also very near support for the range that’s been in-play for the past 15+ months. That range support syncs all the way down to the 1.0500 psychological level, which came into play twice last year; but there’s also been a penchant for support to show around the 1.0600 level such as we saw last week, helping to establish a zone from 1.0500-1.0600 that’s proven to be a stubborn spot for sellers.
On the resistance side of that range, it’s around the 1.1000 level where bulls have been thwarted for the past year-and-change. That price traded twice shortly after the New Year open but, since then, bulls have been unable to get back-above the big figure and that led to the lower-high in March around the 1.0943 level.
EUR/USD Weekly Price Chart
Chart prepared by James Stanley, EUR/USD on Tradingview
Can EUR/USD Bears Break the Range?
When a range has been in-place as long as this one, it can be difficult to imagine anything else happening. But, given the recent pace of data there does exist the possibility for a trend to show.
For next week, the big item on that topic is the Friday release of Core PCE data. Up until recently, this was one of the items that allowed the Fed to hold on to that dovish lean, even despite the stalling that’s shown in Core CPI data. But, last month Core PCE matched its prior month print of 2.8%, indicating stall there, as well, and if we see that data point starting to move higher then reasonably that could further draw down expectations for FOMC cuts this year, and that could effectively boost the USD as rate cut bets further come out of the market.
The week after brings and FOMC rate decision and if the Fed echoes the message that was growing louder this week, that rate cuts aren’t a sure thing in 2024, well that could similarly boost the USD as rate cut bets get further priced-out; and in EUR/USD, that could expose range support at 1.0500 for deeper breakdown potential.
On a shorter-term basis, the big question for now is when or where bears re-enter should the support bounce continue. There’s a nearby spot of possible resistance, spanning from 1.0700-1.0725 that could be attractive for lower-highs should bears remain aggressive. Above that, it gets a bit noisier as the 1.0750 psychological level remains of interest, as does the 200-day moving average which, notably, hasn’t been re-test for resistance since the CPI-fueled breakdown in the pair.
EUR/USD Daily Price Chart
Chart prepared by James Stanley, EUR/USD on Tradingview
--- written by James Stanley, Senior Strategist
