EURUSD has turned towards the downside following high US inflation data and a higher FED funds rate forecast from the FOMC in March. With this turnaround, EURUSD approaches key support levels for the medium term. This week, GDP and PCE data, along with Powell’s speech, could lead to a breakthrough.
(EURUSD Daily Chart)
The upward pressure did not last long due to the hot inflation. Now, momentum is shifting in favor of the USD. However, the two trendlines, one from October 2022 and one from September 2023, create strong support just below 1.08. A break of these trends might trigger a significant selloff because EUR net longs are still pretty high according to the latest COT report, and markets might experience long coverage in the futures market.
(EURUSD 1-H Chart)
The horizontal support zone of 1.0790-1.08 could not hold the downward moves this time, but there have been no hourly candle closes below it so far. The next two days will be key for a possible breakout. However, if the trendlines hold, EURUSD might experience a reaction towards the north, surpassing 1.08 in the short term. Even so, the downside pressures might remain strong over the long term unless US inflation cools down once again.
