📈EURUSD could not overcome the support level

#Forex #Trading #EURUSD #Markets

My fears about a further decline in the EURUSD pair, which I described on Friday, were confirmed. The price could not overcome the level of 1.0550 – 1.0590, and the breakdown that happened on Friday turned out to be false. Following the results of trading on Monday, the price returned again and consolidated above the level of 1.0550 – 1.0590.

Fundamentally, yesterday EUR was probably supported by the statements of Kazaks (ECB representative) that the key indicator for the ECB is core inflation (CPI excluding food and energy). Additionally, this was accompanied by an article in Bloomberg about the sustainability of this indicator. But the most important factor in strengthening the EUR, in my opinion, was the news about the beginning of quantitative tightening (QT) by the ECB from March 1.

Additionally, CPI data in France and Spain were released today, which indicated another surge in inflation in these countries.

In France, the indicator increased by 0.9% (expectations 0.7% / pre. the indicator is 0.4%) in the dynamics of m/m, up to 6.2% in annual terms, which is the peak (!), which was passed in November – December 2022.

In Spain, the CPI increased by 1% in the dynamics of m/m, to 6.1% in annual terms. It’s still a long way from peaks here, but the growth of 1% in a month was the strongest since June 2022.

All these fundamental factors give strong support to EUR quotes in the near term.

The ratio of buyers and sellers has reached parity, which indicates the uncertainty of the participants.

In technical terms, the price returned and consolidated above the level of 1.0550 – 1.0590. The pivot point also coincided with the middle of the ascending (red) channel. The RSI indicator at the same time drew a fractal and grew.

At the moment, the fundamental support of EUR is strong enough, which may lead to a rebound of EURUSD. The nearest target is the 50-day MA, which coincides with the mark near 1.0720.

But in this situation, not everything is so clear. The markets are already laying the ECB rate at 4%, which leads to strong bond sales. For example, the yield of 10-year German government bonds has updated the maximum since 2011. If a seller in the person of the ECB is added tomorrow, this could lead to serious problems in the EU debt market and force the ECB to reconsider its views. It is worth talking about the continuation of the downward trend after overcoming the level of 1.0550 – 1.0590.