Key Points:
- The EUR/USD pair has shown signs of recovery after hitting a low of 1.0223 on January 2nd.
- A weakening US dollar is contributing to the pair’s recent rebound.
- Mixed economic data from Europe may lead to a more hawkish stance from the ECB.
- A falling wedge pattern on the chart suggests a potential bullish breakout.
- Upcoming US labor market data (ADP, NFP) will be key catalysts.
Trading Signals:
Bullish Scenario:
- Action: Buy EUR/USD
- Take-Profit: 1.0500
- Stop-Loss: 1.0225
- Timeframe: 1-2 days
Bearish Scenario:
- Action: Sell-Stop at 1.0375
- Take-Profit: 1.0300
- Stop-Loss: 1.0500
Market Drivers:
- Dollar Weakness: The US Dollar Index has retreated from recent highs, boosting the EUR/USD.
- US Yields & Stocks: Rising US Treasury yields and a rallying stock market indicate mixed market sentiment.
- European Inflation: German CPI data exceeded expectations, hinting at possible hawkish ECB action.
- Eurozone PMI: Positive services and composite PMI figures add to the likelihood of a more robust Eurozone economy,
- Fed Commentary: Fed official Lisa Cook’s comments suggest caution on interest rate cuts, due to high inflation and a strong job market.
- Upcoming Data: Traders are watching for US ADP and NFP data later this week.
Technical Analysis:
- Rebound: The EUR/USD has bounced off its January 2nd low and tested the 1.0400 level.
- Falling Wedge: The pair is currently trading within a falling wedge pattern, a classic bullish reversal indicator.
- Moving Averages: The pair remains below the 50-day and 25-day EMAs, indicating a continuing downtrend despite recent gains.
- RSI: The RSI is showing a symmetrical triangle below the zero line.
- Outlook: A bullish breakout from the falling wedge is likely, with the first target at the 1.0500 resistance level. The pair may also test the 1.0600 resistance before continuing the downtrend.
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