At the European session on Monday, EUR/USD maintained its positive trading trajectory above 1.0900. Despite the IFO sentiment index data from Germany falling short of market expectations, the USD was able to establish a foothold due to the moderate selling pressure that surrounded the currency.
EURUSD, LONG BIAS
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The Relative Strength Index (RSI) on the 4-hour chart rose to 60 early Monday, following a decline toward 50 on Friday. This indicates that the most recent decline was a technical correction and that the bullish bias of EUR/USD remains intact.
Positively, the immediate resistance at 1.0950 is the midpoint of the long-term ascending regression channel, which is situated prior to the psychological level (also known as the static level) and the upper limit of the ascending channel at 1.1030.
A psychological level (static level) at 1.0900 provides interim support prior to the 100-period Simple Moving Average (SMA), which represents the lower limit of the ascending channel, at 1.0860, and the 200-day SMA, which is 1.0830.
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Despite closing Friday in negative territory, the EUR/USD gained over 1% in the previous week. After a relatively calm Asian session on Monday, the pair reestablished its momentum and advanced towards 1.0950.
The US Dollar maintained its position prior to the weekend due to the hawkish remarks of the Federal Reserve (Fed) president in New York, which also caused EUR/USD to recoup a small portion of its weekly gains. Williams argued that the market might be overreacting and stated that they were not at this time deliberating on rate reduction. Meanwhile, Chicago Fed President Austan Goolsbee stated over the weekend that a rate cut was not ruled out at the March policy meeting, which hindered the USD’s ability to maintain its strength to begin the week.
Conversely, Reuters reported that policymakers at the European Central Bank (ECB) were improbable to contemplate a shift in stance prior to March. The news organization reported, citing seven sources with knowledge of the situation, that officials believed it would be challenging to reduce key rates prior to June.
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On Monday, there will be no significant data releases that have the potential to affect the pair’s movement. Market participants will remain vigilant in their analysis of remarks made by central bank officials.
If Fed policymakers attempt to thwart market expectations of a rate cut beginning in March, the EUR/USD could maintain its downside potential. The Euro, conversely, is likely to maintain its superior performance against the USD until June, should ECB policymakers rule out the possibility of a reduction in key rates.