EURUSD Builds Upside Momentum As Market Ignores Gloomy ECB Bulletin

Summary:

The EURUSD pair finished the last two days in the green and seems to have picked up the momentum to sustain the move. What could change that?

The euro continued from where it left on Wednesday, rising 0.09% to trade at 1.0782 at 09:50 GMT in the early morning London session trading on Thursday. The EURUSD pair still has some way to go as it seeks to erase the losses incurred over the past week. Furthermore, the pair is still trading at 7-week lows, tracing back to December 11^th, 2023. However, the euro has gained about 0.4% over the past two days as the dollar consolidates.

The European Central Bank’s latest economic bulletin states that its interest rate policy is unlikely to change before June, despite an underperforming economy. Furthermore, the bulletin says that the Eurozone economy likely contracted in Q4 of 2023. High energy prices continue to slow down the march towards the block’s targeted 2% inflation rate. The zone had a 2.9% inflation rate in December 2023 and the ECB believes that the high interest rates will push down demand and help cool inflationary pressure.

The market will be keen on today’s scheduled release of unemployment data in the US. The initial jobless claims are projected to 221,000, while the consensus for continuing jobless claims stands at 1.878 million. A higher-than-expected figure for either of the indicators will portray a negative outlook for the US economy, thereby exerting downward pressure on the dollar.

Elsewhere, Israel’s rejection of Hamas’ terms of ceasefire could potentially set the stage for a ground offensive in Rafah. Such an action could raise the stakes on the geopolitical situation in the Middle East, thus favouring the safe haven dollar.

Technical Analysis

The EURUSD pair looks set to pivot at 1.0765, with the RSI favouring an upward push. The bulls will likely target the 1.0790 at this point, and a break above this level will push the next target to 1.0805. In the alternative, the pair could swing downwards, thus invalidating the bullish view. Movement below 1.0765 will set the stage for a push towards the first support at 1.0755, beyond which the next support will likely be at 1.0740.