On the daily chart below, we can see the price has been trading in a falling channel. The big move down since November was caused by the first miss across the board to expectations in the US CPI report which made the market to expect the peak in the inflation rate and moderation going forward.
The USD saw big unwinding in record long positions as the market also started to price a less hawkish Fed and an earlier than expected pause and even cuts. Last Friday, those expectations took a hit as the labour market keeps showing incredible strength as the NFP report surprised with a huge beat and the ISM Services PMI jumped back again into expansionary territory.
The market is now worried that although inflation may moderate, the Fed may need to do even more to return to their 2% inflation target. This repricing may send the pair higher, so the falling channel is something to keep an eye on as the price has been diverging with the MACD for months signalling a weakening selling momentum. The target on the upside would be 0.96.
On the 4 hour chart below, we can see the 0.9287 resistance that the price needs to break to confirm a breakout of the channel and trigger a major upward rally. The market is awaiting the US CPI report next week, so meanwhile the market may be choppy. In the case the price breaks down of the 0.9160 support, the sellers will have more confidence to target the next support at 0.9061. The next week is the one that will decide the next move for the pair.
On the 1 hour chart below, we can see that the price retraced to the 50% Fibonacci level before bouncing. It’s currently sitting on the 38.2% level and a previous swing support. The blue short period moving average is also above the red long period moving average signalling upward momentum. The red moving average acts also as further support for the buyers. We may see some buying pressure from here at least till the next resistance at 0.9287.
