The EUR/USD is currently attempting to settle above the 50-day moving average (EMA) near 1.1825. At the same time, the US dollar is reasonably flat against a basket of currencies.
The US Dollar Index trapped between the support at the 20-day moving average (EMA) of 92.60 and the resistance at 92.80. Suppose, the US Dollar Index rises above the 92.80 resistance level. In that case, it will gain momentum and move to the 93.10 resistance level. The EUR/USD will suffer as a result.
Today, traders on the foreign exchange market will focus on the ECB Interest Rate Decision and the related discussion. The crucial question is whether the ECB is concerned about inflation. If the ECB is less dovish than predicted, the euro could receive more support. Traders in the United States will be looking at the most recent labor market data. Initial jobless claims expect to reduce from 340,000 to 335,000. Moreover, it should continue claims that wish to dip from 2.75 million to 2.74 million.
Technical Analysis
The EUR/USD settled below the 20 EMA support near 1.1815. It is now attempting to break above the 50 EMA near 1.1825. If this attempt is successful, it will reach the resistance level at 1.1830.
A break over the 1.1830 level will propel EUR/USD towards the next obstacle at 1.1860. If the EUR/USD rises over this level, it will test the barrier at 1.1880. If the EUR/USD closes above 1.1880, it will go to the next resistance level, 1.1900. On the support side, EUR/USD must close below the 20 EMA at 1.1815 to have a chance of developing bearish momentum in the near term. The next level of support for EUR/USD is at 1.1800.
A successful test of the support at 1.1800 will pave the way for examining the support at 1.1775. If the EUR/USD falls below this level, it will reach the next level of support at 1.1750.
Sterling Bounces Back
On Wednesday, the pound plummeted to a two-week low versus the dollar and its lowest level against the euro since late July.
Late on Wednesday, British legislators backed Prime Minister Boris Johnson. Moreover, statements from Bank of England Governor Andrew Bailey helped the pound recover.
Bailey said he considered the essential prerequisites for an interest rate hike met as Britain’s economy recovered from its nearly 10% economic drop in 2020. In theory, higher taxes might diminish pressure on the Bank of England to begin tightening monetary policy by slowing the rate of economic recovery. However, many analysts and economists feel that the impact of the measures would be limited and will not be a game-changer for the currency.
AUD/USD
The Australian dollar regained propulsion after Thursday’s Doji candle showed that a three-day drop from a new high in nearly two months (0.7478) had lost traction. It bounced to a three-day high, confirming the initial reversal signal.
Bulls confront solid resistance at 0.7408/11 (daily cloud base/50 percent retracement of 0.7478/0.7345 bear-leg). A breach here would signal the conclusion of the corrective phase and a reversal, with the US dollar weaker due to pre-weekend profit-taking.
