The markets are trying to find their balance again after massive moves that started on Friday. EURUSD was the first to respond to the US unemployment data, jumping to over 1.09 from below 1.08 in just minutes. However, during the Monday frenzy, the volatility of EURUSD remained calm. The reason for EURUSD’s initial jump was the fear of a recession in the US, which could trigger rapid rate cuts and decrease money demand simultaneously. But after the initial move, a key resistance level was tested and held, preventing further advances.
(EURUSD Daily Chart)
EURUSD has formed a triangle pattern over the past year, with the highs and lows gradually converging. When these formations conclude, they often lead to sharp moves either up or down. EURUSD is currently testing this triangle.
The 1.10 resistance is particularly strong because it encompasses three different resistances. The first is the triangle’s upper boundary, which is just below but close to 1.10. The second is a horizontal resistance that has been in place since February 2023, halting upward advances more than five times, all at critical moments. The third is the upper boundary of a short-term upward trend channel, situated just above 1.10. With these three resistances combined, EURUSD bulls may struggle to break through 1.10. If their attempts fail, EURUSD could face downward pressure as rate cut expectations normalize.
(EURUSD Monthly Chart)
However, if the strong 1.10 level is broken and the bulls win the battle, there is a good chance that the upward move following the breakout will be powerful. The next main target could be the downtrend that began during the 2008 crisis. This 16-year-long downtrend line is currently around 1.1325.
