An interesting few weeks begin today.
After that, Friday's report, Tuesday's report, and March 20th FOMC policy are scheduled.
These macro events should result in a clear directional bias for EUR/USD and other major currency pairs.
As things stand, we may see a short-term peak forming and EUR/USD could rise towards the 1.10 handle and then fall.
This week's focus will be on the European Central Bank's policy decision later today, followed by the US non-farm employment report on Friday.
Before we dive into these events and the dollar, let's first take a quick look at the EUR/USD chart.
EUR/USD technical analysis and trading ideas
Wednesday's dollar sell-off created reversal-like price patterns in several major currency pairs, including the EUR/USD.
The currency pair hasn't looked back much since falling below its December lows last month and rallying further.
It is still rising and has been above the 200-day average for several days. Meanwhile, the 21-day index average is above his 200-day mark, another bullish sign.
Given the bullish signals above, I tend to buy the EUR/USD dip rather than sell on the upside, a strategy that worked well at the beginning of the year.
The key short-term support is seen around 1.0850 to 1.0885, which currently needs to hold to maintain the bullish bias.
The line in the sand for me is last week's low of 1.0795. If EUR/USD falls below that level, it will be a bearish outcome.
So, as it stands now, it looks like EUR/USD is headed towards 1.10 again and could rise even further than the breakdown. Let's see if the ECB has other ideas today.
Has the dollar reached its peak?
The recent rise in EUR/USD has a lot to do with the dollar being weaker than the euro.
The U.S. dollar fell on Wednesday on some soft U.S. economic data, with Fed Chairman Jerome Powell making surprisingly less hawkish statements, saying rate cuts remain on this year's agenda but the Fed needs to be patient. I just reiterated that there is.
Today's macro highlights include weekly data, but we don't expect it to move the dollar much, with investors likely awaiting Friday's February NFP hiring announcement.
The consensus for NFP is around 200,000, but some pre-NFP indicators suggest that NFP could be lower.
If that happens, it would likely be bad news for the dollar, as interest rates at the short end of the US yield curve could fall further, but it would be good news for EUR/USD.
NFP statistics were very strong in January and December, so it's worth keeping an eye on that correction as well. If there is a significant downward revision, we need to be wary of a sharp drop in the dollar.
The market currently expects a rate cut to occur in June, not March.
Some weakness has been observed in recent data, but as mentioned above, the key highlight is Friday's jobs report.
The debt burden of the United States and most other developed countries is increasing at an alarming rate, increasing pressure to lower interest rates.
There are concerns that these countries will not be able to maintain high interest rates for a long period of time.
The government will have to spend much more to service its debt, while the possibility of a recession will force it to borrow even more with rising interest rates.
Perhaps this is part of the reason why the dollar has started to rebound, and why safe-haven gold has hit record highs.
Major currency pairs such as the and EUR/USD have also started to rise recently, but to a lesser extent as the UK and Eurozone economies also face similar debt problems as the US.
It hit a record high of more than $69,000 on Tuesday, further highlighting investors' concerns about fiat currencies whose value has been eroded by high inflation and record borrowing.
A word about ECB policy decisions
The European Central Bank is expected to keep borrowing costs unchanged for the fourth consecutive time at today's meeting.
However, new economic forecasts are expected to strengthen arguments in favor of rate cuts later this year.
Like most economists, I expect the ECB to keep deposit rates at a record high of 4%, despite the majority of officials remaining close to the 2% target, He advises against premature claims of victory.
I think this should stabilize the euro.
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