The EURUSD currency pair is trading below the crucial 1.100 resistance level, leaving many wondering whether the single currency has what it takes to break back above 1.10. The short answer is anything can happen in the markets. However, let us explore some likely scenarios.
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First, no significant releases are planned for this week from the European docket except for moderate data, such as the German GfK consumer confidence data, the flash Markit PMI data, and the M3 Money supply data, all second-rate releases.
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However, the macro situation will be vastly different next week as the US FOMC is set to announce its interest rate decision, followed closely by the Bank of England and the European Central Bank led by Christine Lagarde.
Many expect the Fed to implement a lower rate hike than usual, with opinions split between whether it will be a 50 or 25 basis points hike. On the other hand, the ECB is expected to announce a 50 basis point rate hike given that it is playing catch up to inflation and is behind the Fed in hiking rates.
If the ECB rate hike exceeds the Fed’s, we expect the euro to rally higher and easily break above the 1.10 resistance level. So, what about this week? The pair could try rallying higher, but I do not foresee any massive movements until next week.
However, the markets are always susceptible to disruption; hence, we might get some decent move off the PMIs. The moves will favour the side that has the better readings. If the US PMIs are higher than the European, we could see the pair fall and vice versa if the European PMIs are more robust than the American PMIs.
Meanwhile, traders and investors should keep an eye on the pair and the US Dollar Index, which shows the dollar’s position against a basket of its peers.
*This is not investment advice.
The EURUSD price chart.
The EURUSD currency pair is trading near the crucial 1.100 level. Can it break above it?
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.