The Euro-Dollar exchange rate is hovering around 1.1350, holding on to its recent gains against a generally lower US Dollar.
In advance of Wednesday’s release of the United States’ inflation report, Treasury rates have retreated from two-year highs. Furthermore, the speech of ECB Lagarde and Powell’s testimony is also expected.
An Examination Of The Technical Aspects
EUR/USD CHART Source: Tradingview.com
Using the four-hour graph, the Relative Strength Index is maintaining a somewhat positive reading above 50, indicating that the negative force is not yet powerful enough to indicate further losses in the immediate future.
Furthermore, the pair is moving above both the 200-period and 100-period simple moving averages (SMAs) on the same chart.
On the upside, the level of 1.1360 (the stationary level) serves as the first stumbling block. If this level proves to be supported, the pair may go for 1.1380 (the stationary level) and 1.1400 (the resistance level) (psychological level).
1.1315/1.1320 (100-period SMA, 50-period SMA, and 20-period SMA), 1.1300 (200-period SMA, psychological level), and 1.1280 (static level) are the respective supports.
An Overview Of The Fundamentals
After plunging beneath 1.1300 on Monday, the EUR/USD has recovered its footing and appears to have entered a stabilization period, as seen by a trade beneath 1.3550 early on Tuesday.
The duo is still at the whim of the Dollar’s market cap, and the confirmation hearing for Federal Open Market Committee Chairman Jerome Powell might increase volatility in the second period of the day.
Powell’s planned opening remarks, which were made public on Monday, did not provide any new insights into the direction of the country’s policies.
Presiding officer Powell will state that they intend to prevent higher inflation from becoming “entrenched” and will underline that the United States economy is expanding at its fastest rate in recent years.
Market investors will pay particular attention to the Q&A session to get insight into the schedule of the rate rise and the possibility of the implementation of quantitative tightening measures.
The minutes of the December session revealed that policymakers intended to begin shrinking the financial statement following the very first-rate rise, prompting a spike in the yield on US Treasury bonds as a result of the announcement.
If Powell maintains his hawkish stance, we could see another leg upward in rates, which could result in a resurgence in the appreciation of the US currency.
If Powell, on the other extreme, adopts a conservative tone, the Dollar may have a tough time attracting new investors.
The senior economist of the European Central Bank (ECB), Philip Lane, stated on Tuesday that he anticipates inflation to begin decreasing in the first quarter of 2019.
Lane stated that he has not shown any market dynamics that indicate inflation would continue at the European Central Bank’s objective in the longer term, and that this has restricted the potential benefits of the currency union for the moment.