EURUSD Outlook: EURUSD Challenges One Year Resistance

US unemployment claims
FOMC member Barkin speaks
Technical Analysis: EURUSD vs US Dollar Index (DXY)

With the VIX reversing down, market volatility has neutralized as we head into US CPI week. The volatile wave between US recession fears and the Japanese rate hike has stabilized for now, with insights awaited from FOMC member speeches regarding the timing and magnitude of the next rate cut.

The next volatile indicator to watch is the US unemployment claims today. However, with the recent trend of economic indicators dropping and fueling rate cut calls, next week’s CPI results are set to take the larger share of volatility and could either complicate or facilitate the path toward the rate cut decision and a new market direction.

EURUSD vs DXY EURUSD Outlook: EURUSD vs US Dollar Index – Log Scale

Source: Tradingview

The EURUSD extended a wick above its consolidation, unlike the US Dollar index, which respected its consolidation borders. Historically, the DXY chart often leads the way, though not always predictably.

The bearish dominance of the wick extension on the EURUSD chart suggests potential reversals until prices manage to close beyond the consolidation, confirmed by momentum and volume indicators.

EURUSD Outlook: EURUSD – 3-Day Time Frame – Log Scale

Source: Tradingview

The EURUSD extended its latest wick towards the 1.10 high, aligning with the highs of November 2023, but then dropped back within its consolidation range. The potential support levels are 1.08, 1.0740, and 1.0680 respectively.

The Relative Strength Index (RSI) indicator shows similar consolidation and has not broken above its resistance, confirming further bearish pressures.

On the upside, breaking above the consolidation and closing above the 1.1020 mark could pave the way towards the December 2023 high at 1.1140, followed by 1.1220 and 1.13 respectively.

--- Written by Razan Hilal, CMT

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