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EUR/USD Rejects Bearish Pattern as DXY Index Tumbles
Invezz.com – The exchange rate continued to rise on Friday as the US dollar index () approached a key support level. The EUR to USD exchange rate was trading at 1.1061, the highest level since April 2022. In total, the pair is up more than 15% from its 2022 low point.
DXY index crash
The main reason why the EUR/USD pair has risen sharply is that the US Dollar Index has been in a strong downward trend. It has moved to a low of $100.8, which is much lower than last year’s high of $115.
A closer look shows that the US dollar has slumped against the currencies of most developed countries. For example, it has fallen 12% against the Japanese yen, 20% against the British pound, and 12.5% against the Swiss franc.
This price action comes as investors anticipate that the rate hike cycle we saw in 2022 is coming to an end. In fact, the Fed slowed its rate hikes to 0.50% in December from the previous four to 0.75%. It has risen 0.25% in the last two meetings.
Signs are emerging that are more supportive of a turn from the Federal Reserve. For example, data released last week showed the number of job vacancies in the US fell below 10 million for the first time since 2021.
Watch here: https://www.youtube.com/embed/YTd_YC-dOgQ?feature=oembed
Additional data showed that wage growth continued to fall even as the headline unemployment rate fell to 3.5%. Manufacturing and services PMIs were also a bit disappointing. And this week, data revealed that US inflation data continued to fall in March.
And the FOMC minutes showed that there was concern that the US was heading into recession. On the other hand, the European economy is doing well and appears to be dodging a recession this year.
EUR/USD Technical Analysis
TradingView EUR/USD chart
The daily chart shows that the EUR to USD exchange rate managed to cross the important resistance point at 1.1030. By crossing this price, the pair invalidated the double top pattern that has been forming. I wrote about this pattern here. The neckline for this pattern was at 1.0500. The pair moved above the 25-day and 50-day moving averages.
Therefore, the pair is likely to continue higher as buyers are now targeting the next resistance at 1.1500, which is 4.2% above the current level. A drop below the support at 1,100 will invalidate the bullish view. If this happens, the DXY index will drop to around $95.
The post EUR/USD rejects a bearish pattern as the DXY index plunges appeared first on Invezz.
This article was originally published by Invezz.com
