The Euro is currently facing a period of consolidation as a result of a sharp decline on Wednesday, marking its biggest daily loss since April 30. This decline was largely driven by fresh risk aversion in the market, leading to a cautious approach among investors.
Despite finding support at the key level of 1.0790/80, which includes the top of the thick daily cloud, the 200DMA, and Fibonacci 38.2% level of the 1.0601/1.0895 rally, bears are still on the lookout for fresh direction signals. The formation of a failure swing pattern, a large bearish candle on Wednesday, and a bearish cross between the 10/20DMA all indicate near-term downside pressure.
However, it is worth noting that momentum remains positive on the daily chart, with the larger uptrend from 1.0601 still intact. As long as the price action stays above the 200DMA, Fibonacci support, and daily cloud top, there is a possibility of a healthy correction in the near future if the price bounces strongly.
Fundamentals continue to favor the dollar, with hopes for a Fed rate cut diminishing due to sticky inflation. Market participants are closely monitoring key economic events such as the release of the US revised Q1 GDP, weekly jobless claims, and the PCE report – the Fed’s preferred inflation measure – to provide fresh signals for the market.
Looking ahead, a firm break below the 1.0780 zone could signal a strong bearish movement, while surpassing the initial resistance at 1.0816 (20DMA) may alleviate immediate downside pressure. Furthermore, an extension above the 10DMA at 1.0838 would provide a more robust bullish signal for the Euro.
The Euro is currently navigating through a period of uncertainty amid market volatility. While technical indicators point to downside pressure in the near term, positive momentum on the daily chart suggests the potential for a healthy correction. With fundamentals favoring the dollar, investors will closely watch key economic events for further market direction.