The EURUSD currency pair continues to trade near the important level of 1.07. Friday's increase in volatility suggests that the quotes will come out of the current consolidation soon. While the fundamental background is supporting the dollar now, the technical picture is less certain. On the one hand, the downtrend line assumes a further decline of EURUSD. But at the same time, technical indicators have already reached the oversold zone, and in these conditions, the euro has a chance to rebound.
Today is unlikely to bring significant certainty in the further dynamics of the EURUSD. The long weekend continues in the U.S., while the publication of important U.S. and European macroeconomic statistics will begin on Tuesday. Meanwhile, market participants are analyzing the events that happened on Friday and over the weekend.
The initial agreement on the debt ceiling between U.S. officials plays in favor of some weakening of the dollar. The agreement provides for a pause on the debt ceiling until January 1, 2025, although Congressional approval remains a necessary requirement. The vote should be on Wednesday, and a possible disruption of the agreement by the most radical Democrats or Republicans cannot be excluded.
At the same time, Friday's statistics on the U.S. economy, in contrast, support one more increase in the Fed's rates and, as a consequence, the growth of the U.S. currency. On the basis of news about the recession in Germany, it becomes a serious factor favoring the continuation of the EURUSD downtrend. Tomorrow's data on the business climate in the manufacturing and in the service sector of the EU may help the euro exchange rate, but they are unlikely to change the balance of power on the foreign exchange market radically.
The immediate breakout of the EURUSD below the 1.07 level is prevented by the oversold RSI indicator. Nevertheless, the growth of quotes is not necessary for unloading it, it is enough to stay within the flat range of 1.07-1.077. In the future, the main scenario assumes the continuation of the movement to the support level of 1.055.
The following trading strategy option can be suggested:
Sell EURUSD in case of a breakdown of the 1.07 level. Take profit – 1.055. Stop loss – 1.077.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
