EURUSD jumped after cooler inflation data from the US. The cooler inflation means a lower likelihood of further rate hikes (almost none, according to future and swap markets) and an increased probability of earlier rate cuts (perhaps in the second quarter of 2024) from the Federal Reserve (Fed). The market has already begun anticipating the earlier rate cuts, as US government yields fell sharply, and stock indices, as well as EURUSD, experienced a notable increase.
(EURUSD Market Profile – 1Y)
After the surge, EURUSD has formed a potential flag formation just below the 1.09 resistance. 1.09 was the anticipated target for market profile analysis in November and appears to be holding the price for now. Additionally, 1.09 represents a 100% extension of the early November surge. With the flag formation in place, EURUSD is currently trading within a range of 1.0830 and 1.0885 levels.
If the flag formation fails to break out towards the north, the EURUSD cross might experience a pullback towards the 1.0760-1.08 zone, possibly using this range as a platform for another upward move.
(EURUSD Hourly Chart)
Either a pullback or a breakout from the flag formation, EURUSD bulls seem to be in control at the moment. As long as the 1.0760 support holds, EURUSD is likely to make an attempt towards the 1.10 – 1.1040 zone. This zone will likely create a key resistance for the medium term if the upward move materializes. The 150% extension of the earlier November surge is at 1.1015, the lower line of the broken uptrend channel from December to September is at 1.10 and is slowly rising. In addition, considering the past year, volume above this zone appears to be lower, and attempts above it did not last very long.
For the remainder of the year, the trader may monitor the 1.076-1.08 zone as support, 1.10-1.1040 as resistance, and 1.09 as a pivot point if the fundamentals do not change significantly.
(EURUSD Daily Chart)
