Despite the recent strong data from the US and more normalized rate cut expectations, EURUSD still holds the 1.07 support and has turned its direction towards the 1.0910 resistance once again. Traders are expecting a recovery from the Eurozone this year, as Germany’s ZEW expectations index has been on an uptrend since the July dip.
(EURUSD Daily Chart)
Since the start of 2023, EURUSD has been ranging between 1.048 and 1.11, with only a few exceptions that last only a couple of days at worst. During those periods, the Relative Momentum Index (RMI) has worked almost perfectly with both buying and selling signals. In the last three instances when the RMI crossed its signal moving average when it was below 30, all of them came with an uptrend. As of last week, the RMI gave another buying signal, almost simultaneously with the year-to-date downtrend ending. This clearly shows the momentum is shifting in favor of the Euro.
On the other hand, EURUSD has two key resistances to pass to make another upward move. These are the 50-day moving average, currently at 1.0882, and the 1.0910 level, one of the two key sub-pivot levels between the 1.048 and 1.11 borders. If EURUSD can break through these two levels, it has the potential to make another move towards 1.11. However, possible strong GDP and PCE data from the US this week can change the trajectory in the short term at least, and might trigger a pullback towards the broken trendline. In that case, the 1.07 support will be crucial for further moves.
