Is it only a matter of time before a bigger technical move comes for EUR/USD? There is definitely an argument for that when you look at the chart at least. Here’s how things work on the daily chart:
Daily chart of EUR/USD
The pair has been moving in a consolidation phase since falling below the 1.1000 level to start the new year. Since then, price action has largely stabilized between 1.0900 and 1.1000. The main trend line support (white line) helped cap the downtrend on January 5 while the same 1.1000 level has helped cap the uptrend on two occasions already.
With that in mind, the price action is now wrapping around in a tight range with a type of triangle/flag pattern forming. If this is any guide, it looks like a technical breakout could be on the cards next. The question is, which way might this lean?
At this point, there are still considerations for both sides. On the dollar side of the equation, a strong supply of Treasuries may keep the dollar in check. But I think central bank expectations will be the most important driver at the end of the day.
Traders were anticipating roughly 82% odds of a Fed rate cut in March, while the ECB’s April rate cut was fully priced in. While both may end up backing away from those expectations, I think the Fed’s response seems more likely at this point than the ECB.
It all depends on what the inflation numbers say next, but either way, it will be interesting. Even more so when you consider the technical setup for the EUR/USD pair above.