EURUSD: Gains, but the current bullish momentum may end soon. Following a minor dip in previous days, the euro resumed its ascent on Thursday and traded higher- around 1.0785. Thanks to risk-on mood.

Taking a longer-term perspective, the EURUSD currency duo has mounted a strong rebound in recent months. Climbing better than 13% from the nadirs of a protracted bear market.

EURUSD OUTLOOK

After a small reversal earlier this week amid a risk-on market tone. The EURUSD is now rising once more. Although the euro is experiencing good momentum, the bullish stimulus may soon run out of steam.

At the end of September, the previous year, the exchange rate declined under 0.9600. The quick comeback of the euro has been fueled by a variety of factors, Notably, general U.S. dollar weakening in the forex market and the sharp drop in natural gas prices.

European gas costs have fallen more than 85% off such sky-high rates. Despite decreasing need due to above-average winter temperatures after reaching peak highs of €300/MWh by August 2022.

The risk of an energy dilemma in the area brought on by Russia’s weaponization of natural fuel shipments in the wake of its incursion of Ukraine. Which has been significantly lowered. As a result of this tale and substantial gas inventories.

EURUSD, EUROPEAN NATURAL GAS PRICES, and DXY INDEX GRAPH

Source: TradingView

Despite the fact that the euro zone’s prognosis has brightened since 3 months ago, while things were bleak. The zone is still not free of the trouble. In fact, many Wall Street analysts still think a slight recession will occur late current year.

The upside potential of the euro could be constrained in the near future by weak economic growth. Which would allow the U.S. dollar to recapture some of its bullish momentum.

The Fed Future Stance Fundamentals

Although speculators may be misreading the risks of additional monetary tightening considering the robustness of the U.S. economy. Forecasts that the Fed will adopt a less aggressive attitude in the face of declining inflation. It has definitely reduced interest for the dollar and boosted riskier currencies.

The prior assertion is supported by the January job market report. The Bureau of Labor Statistics reports that U.S. firms increased their payrolls by 517,000 in previous months. Exceeding expectations and marking the highest increase since July 2022.

The substantial increase in employment activity raises the possibility that wage constraints and demand will stay higher than ideal throughout the intermediate term. Delaying the Fed’s objective rate of inflation of 2.0% for consumer prices. As a result, policymakers may decide to keep raising interest rates at subsequent meetings.

Overall, despite the fact that the EURUSD is still trending upward due to bullish momentum. Precaution is advised due to the increasing likelihood that price action will reverse in the not too far in future.

Technical analysis of EURUSD

The bulls were able to gain the upper edge once the European markets opened. However, resistance soon encountered around 1.0767 and the 200 A.  The cross might attain levels near 1.0575 if the pessimistic outlook persists.

The EURUSD cross might hit levels near 1.0575 should the pessimistic mood persists. But if the bulls decide to push issues into their own hands. We might observe another attempt to breach through the barrier around 1.0767.

At 13:30 GMT today, the U.S. unemployment claims report could have a significant impact on market sentiments and produce significant volatility. Because it will reveal if the Fed’s aggressive monetary policy is beginning to chill the job market.

Resistance is found close to the psychological 1.0800 handle. If, bulls succeed to retain charge of the market and drive prices higher. On sustained strength, focus will go to 1.0940.

On sustained strength, focus will go to 1.0940.  On the flip hand, first support is seen around 1.0675/1.0700. Should sellers come back and start a bear reversal. There may be room for a retraction toward 1.0585 if this floor is broken.

Pivots – Support and Resistance key levels

EURUSD Daily Technical Indicators