At the beginning of last week, there was no indication of a change in the downward trend for the EURUSD rate. The euro was weaker than the dollar. The declines were also supported by some members of the ECB, who communicated that the ECB's cycle of interest rate hikes had likely come to an end. In contrast to the potential single hike by the Fed, which was on the table, this translated into a continuation of the downward trend on EURUSD.
However, everything changed after a series of labor market data from the USA, after which the dollar began to weaken significantly. Investors are now speculating whether another hike is still one of the options. Even institutions do not agree on these issues. Barclays expects the US Federal Reserve to raise interest rates by 25 basis points in January 2024. Meanwhile, Goldman Sachs believes that the Fed has already ended its cycle of hikes. The change in perspective caused a sharp drop in bond yields and a reversal of the trend on EURUSD.
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Looking at the chart technically, EURUSD broke through a significant downward trend that began in mid-July 2023. After the ADP data on Wednesday, the price broke out from the lower support zone at the level of 1.0540. Then, after the NFP data on Friday, the increase was accelerated, breaking through the resistance at the level of 1.0650. If the upward trend continues, it is possible that the next level to be tested will be 1.0855. This range also coincides with the lower limit of the last upward channel. Source: xStation 5
