EURUSD Finds Stability Above 1.0800-But How High Can It Go?

Summary:

EURUSD has been on the rise over the past five trading sessions, but could the release of FOMC minutes spoil the party for the euro?

The euro continues its recent winning streak against the US dollar, with EURUSD finding stability above 1.0800. The pair was trading at 1.08125, having inched up 0.05% during the Asian session. The US dollar is under pressure from a combination of falling treasury yields and a lack of high-impact macroeconomic data.

Yields on the 10-year treasury bonds stood at 4.279% at press time, remaining largely flat from Tuesday’s closing level. Furthermore, the yields have fallen from 4.30% on Friday, underlining the steady descent. The dollar’s recent declining strength is reflected in the DXY trajectory, which has been heading south over the last six sessions.

The EURUSD rate will get fresh impetus on Wednesday when the Federal Open Market Committee (FOMC) releases minutes of its January meeting. The Fed maintains that its eyes are currently focused on bringing down inflation to 2%, and analysts believe there won’t be any rate cut in March. Nonetheless, the FOMC minutes will provide a broader scope of the underlying issues that will likely influence the Fed’s next rate cut.

Meanwhile, the euro could get some action from Germany. Eurozone’s largest economy will hold its 10-year bond auction during the European session, and the outcome of the auction could impact the euro. Also, Bundesbank President and voting member of the ECB Governing Council, Joachim Nagel, is slated to speak today. His speech will be closely monitored, as it could provide clues on the ECB monetary policy trajectory, and probable interest rate cut timeline.

Technical analysis

The Relative Strength Index (RSI) on the 30-minute EURUSD chart favours upside momentum. Look out for price movement relative to the pivot 1.0795 level. A break above that level looks more likely, driven by the current bullish momentum. This could push the pair to 1.0825, beyond which it will meet resistance at 1.0840. However, if the pair goes below 1.0795, watch out for support at 1.0780. A breach of this level will invalidate the bullish view, with the next support moving to 1.0760.