EUR/USD Technical Analysis: Breaking 1.10 Resistance

In the last trading session of last week, the bulls succeeded in moving the price of the EUR/USD currency pair, upwards, towards the 1.0973 resistance level, closest to the psychological resistance 1.1000.  This supports the bulls’ control over the trend. The broader downward path of the currency pair pushed it towards the support level of 1.0833 last week. The rebound of the EUR/USD bullish came in the wake of the divergence of the US job numbers, which halted the recent gains of the US dollar.

The recent stabilization of the EUR/USD may not continue with one analyst warning against taking a bullish stance at this point. The latest research by Francesco Pessol, FX Analyst at ING Bank, suggests that current market conditions favor the return of the dollar, which could limit the potential for a rally in the EURUSD exchange rate.

The EURUSD found some support in the past few days, buoyed by the weak momentum of the US dollar, despite the strong economic data out of the US. The analyst notes that while the euro may benefit from the current weakness of the US dollar, he is still reluctant to chase the EURUSD beyond the 1.0900 level. “The current set of market conditions suggests 1.0750 / 1.0800 to be a more favorable trading range,” the analyst stated. This indicates a more cautious approach to the euro’s near-term outlook against the US dollar. A lackluster calendar for the Eurozone, with uninspiring data releases, adds to the case for neutrality or a potential bounce in EUR/USD.”

The focus now turns to keynote speakers at the ECB, including President Christine Lagarde, and while it remains unclear whether Lagarde will touch on monetary policy, insights from ECB policymakers, including Guindos and Stournaras and Nagel, will be watched closely for any indications of the policy direction going forward. Market participants are eagerly awaiting any signs of a possible shift in the European Central Bank’s stance, which could affect the euro’s path against major currencies, including the US dollar.

On the other hand, the dynamics of the US labor market are important because they determine the dynamics of wages, which is a major driver of domestic inflation that the US Federal Reserve is trying to suppress through higher interest rates. Expectations were for 230,000 new jobs to be created in June, a result higher or lower than this is likely to set the trend in the dollar, with larger moves after the larger failure. However, one analyst believes that the risks to the US dollar are not equal, as the downside risks increase when there is any inability to reach the target. “If the market sees even the smallest indication that the US labor market is not as strong as expected, I would expect to see dollar weakness,” says Antje Praefcke, forex analyst at Commerzbank.

• There is no doubt that the recent move of the EUR/USD currency pair gives the bulls an opportunity to control the direction.
• This is especially if the move was stable above the psychological resistance 1.1000, and this requires increasing pressure on the dollar after the recent US jobs numbers.
• There will be no move for the technical indicators towards strong overbought levels over the same period of time without moving above the resistance 1.1120.

On the other hand, as I mentioned previously, moving towards and below the support level at 1.0885 will be important for the evaporation of bullish hopes and for the return of the bears by moving towards deeper support levels.

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