As financial markets navigate a landscape shaped by economic data and evolving policy dynamics, traders remain focused on key economic releases that could influence near-term sentiment. This week's lineup of high-impact events, including U.S. unemployment claims and the Bank of Japan's policy decision, provides critical insights into the broader economic trajectory.
Meanwhile, technical indicators suggest a potential shift in market momentum, with the EURUSD pair showing signs of recovery after an extended decline. Strengthening bullish signals and key support and resistance levels offer valuable guidance for market participants. On the fundamental front, the U.S. dollar remains under pressure as investors weigh the implications of ongoing trade policy uncertainties and their potential impact on global market stability.
Overview
As financial markets navigate a landscape shaped by economic data and evolving policy dynamics, traders remain focused on key economic releases that could influence near-term sentiment. This week's lineup of high-impact events, including U.S. unemployment claims and the Bank of Japan's policy decision, provides critical insights into the broader economic trajectory.
Meanwhile, technical indicators suggest a potential shift in market momentum, with the EURUSD pair showing signs of recovery after an extended decline. Strengthening bullish signals and key support and resistance levels offer valuable guidance for market participants. On the fundamental front, the U.S. dollar remains under pressure as investors weigh the implications of ongoing trade policy uncertainties and their potential impact on global market stability.
Key Economic Events
Thursday 15:30 (GMT+2) - Canada: Retail Sales m/m (CAD)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday Tentative - Japan: BOJ Policy Rate (JPY)
Friday 10:15 am (GMT+2) - France: French Flash Manufacturing PMI (EUR)
Friday 10:15 am (GMT+2) - France: French Flash Services PMI (EUR)
Friday 10:30 am (GMT+2) - Germany: German Flash Manufacturing PMI (EUR)
Friday 10:30 am (GMT+2) - Germany: German Flash Services PMI (EUR)
Friday 11:30 am (GMT+2) - UK: Flash Manufacturing PMI (GBP)
Friday 11:30 am (GMT+2) - UK: Flash Services PMI (GBP)
Friday 16:45 (GMT+2) - USA: Flash Manufacturing PMI (USD)
Friday 16:45 (GMT+2) - USA: Flash Services PMI (USD)
Technical Analysis
Following a peak at 1.12134 on September 25, the EURUSD pair underwent a sustained sixteen-week decline, eventually finding support at 1.01772. This downturn was subsequently reversed by the formation of a failure swing reversal pattern, characterized by a higher trough at 1.02581, which held above the previous low, and a breakout above the critical resistance level of 1.03531. This breakout signaled a shift in market sentiment, suggesting a transition from a downtrend to an emerging bullish phase.
The bullish bias is further reinforced by EURUSD's sustained position above the 50-period Exponential Moving Average (EMA), providing additional confirmation of upward momentum. Moreover, key momentum indicators reflect strengthening bullish conditions, with the Momentum Oscillator remaining above the critical 100 threshold, indicating persistent buying pressure. Similarly, the Relative Strength Index (RSI) maintaining a position above the 50 level underscores growing demand and positive sentiment in the market.
From a technical perspective, the prevailing conditions suggest the potential for further upside, with market participants closely monitoring key resistance levels as the pair aims for higher targets.
Potential Upside Targets
If the bulls maintain control of the market, traders may consider the following four potential upside targets:
1.04567: The first resistance is seen at 1.04567, which corresponds to the daily high marked on January 22.
1.06605: The second price target is identified at 1.06605, representing the 423.6% Fibonacci Extension drawn from the high point, 1.03531, to the low point, 1.02581.
1.08193: The third resistance level is established at 1.08193, representing the 61.8% Fibonacci Retracement drawn from the high point, 1.12134, to the low point, 1.01772.
1.09359: An additional resistance is recognized at 1.09359, aligning with the peak marked November 5.
Potential Downside Targets
If the sellers take control of the market, traders may find potential opportunities in the following four downside targets:
1.03531: The initial support level is observed at 1.03531, reflecting the swing high from January 15.
1.02662: The second level of support is identified at 1.02662, corresponding to the weekly Pivot Point, PP, calculated using the standard methodology.
1.01772: The third level of support is 1.01772, which corresponds to the swing low from January 13.
1.00903: An additional support is seen at 1.00903, reflecting the weekly support, S2, calculated using the standard Pivot Points methodology.
Fundamentals
The U.S. dollar remained near recent lows as markets reacted to President Trump's cautious approach to tariffs, delaying broad-based measures in favor of policy evaluations. The dollar index saw its steepest drop since November 2023 but later regained some ground before retreating again. Analysts suggest the administration's measured stance may indicate a more gradual trade policy shift than initially expected. Despite the temporary pullback, uncertainty around tariff implementation continues to influence market sentiment. A strong dollar poses risks to corporate earnings and emerging markets, with analysts warning of ongoing volatility as U.S. policies evolve.
Conclusion
As markets digest key economic data and shifting policy dynamics, the outlook remains fluid, with traders closely monitoring developments for potential market-moving catalysts. The EURUSD pair's recent bullish momentum suggests further upside potential, supported by favorable technical indicators and improving sentiment. However, the ongoing uncertainty surrounding U.S. trade policies continues to weigh on the dollar, introducing an element of caution. Market participants should remain vigilant, keeping a close eye on key support and resistance levels while adapting to evolving macroeconomic conditions.