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Will We See A Bounce Off the 100 Weekly SMA in EURUSD?

The rate of EUR to USD tumbled 2.5 cents in the 2nd week of April, but last week the 100 SMA held as support and a bullish reversing pattern has formed in EUR/USD. However, fundamentals point down for this pair, as the ECB increases the dovish tones and rate cut comments, so there’s a bit of a contradiction between the technical and fundamental analysis, which will likely be resolved this week as markets get going.

EUR/USD has been making lower highs since July last year, and moving averages have turned into resistance on the weekly chart, but there is still one left which is acting as support. The 100 SMA (green) held the decline two weeks ago and last week the price formed a doji candlestick, which is a bullish reversing signal after the fall.

EUR/USD Chart Weekly – The 100 SMA Held As SupportChart EURUSD, W1, 2024.04.21 21:44 UTC, MetaQuotes Software Corp., MetaTrader 5, Demo

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EUR/USD ended last week close to where it started, hovering around the 1.0650 level. Although there were fluctuations in trading throughout the week, both technical and fundamental traders may have observed that the currency pair has settled into a relatively stable price range.  The EUR/USD rate saw a retracement higher on Wednesday, but the upward momentum appears modest, suggesting that the decline may persist. Now the stochastic indicator is oversold, which is also pointing to a bounce higher.

ECB Prepares to Cut Interest Rates, FED Keeps Holding

The European Central Bank (ECB) has adopted a dovish stance, with President Lagarde and several ECB members advocating for rate cuts due to a sluggish economy and declining inflation. Meanwhile, recent comments from Fed Chairman Jerome Powell, expressing doubts about meeting the Fed’s inflation target, have tempered expectations for rate cuts by the Federal Reserve. This sentiment could support the US dollar (USD) while constraining advances in EUR/USD.

Over the weekend, Bank of France Governor Francois Villeroy de Galhau, a member of the European Central Bank Governing Council, stated that a rate cut in June is becoming increasingly plausible. He stated that, while the ongoing conflict in the Middle East has not yet resulted in a large increase in oil prices, if such a scenario occurs, it will need a review of whether the shock is brief and restricted or if it stretches into underlying inflation. Villeroy de Galhau voiced his desire for a rate cut at the ECB’s June meeting, noting that there is no need to postpone it any longer. He advised that such a step be followed by other cuts at a manageable pace.

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Skerdian Meta
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Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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