Trend traders huddle up!
EUR/USD is chillin’ like a villain near a key resistance zone just as the Euro Area is printing PMI reports and the U.S. is dropping key labor market-related data.
Will the pair extend its trend in the next few days?
We’re taking a closer look at the 4-hour chart:
EUR/USD 4-hour Forex Chart by TradingView
In case you missed it EUR/USD has been in a downtrend since October when the markets started taking a chill pill on their dovish Fed expectations. European Central Bank (ECB) members, on the other hand, have fed the market doves by supporting more interest rate cuts.
Geopolitical conflicts between Russia and Ukraine and Israel and Iran-backed Hezbollah have also limited risk appetite in the region while boosting the appeal of safe haven assets like the U.S. dollar.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the euro and U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
EUR/USD turned lower from the 1.1200 psychological handle and rode a downtrend all the way to 1.0350 before EUR bulls stepped in.
How low can EUR/USD go this week?
EUR bears look ready to pounce from EUR/USD’s current levels just above 1.0500 as it lines up with the 38.2% Fibonacci retracement of November’s downswing.
In addition to that, last week’s highs and today’s levels also line up with the 100 SMA resistance on the 4-hour time frame.
Bearish candlesticks around the 1.0500 – 1.0520 area may attract EUR bears and drag EUR/USD to its 1.0400 lows. Heck, we may even see new Q4 lows if the bears get traction this week!
Of course, we’re not ruling out an extension of USD’s weakness from the previous week.
If you’d rather buy EUR against USD, then you can also wait for sustained trading above the 1.0600 psychological handle.
Bullish candlesticks above the level could set EUR/USD for a possible trend line retest near the R2 (1.0704) Pivot Point line, 61.8% Fibonacci level, and trend line resistance that’s been around since October.
As always, watch out for other top-tier catalysts that could impact overall market sentiment, and make sure you practice proper position sizing when taking any trades!