Currently, any dip towards the support level formed by Thursday’s candle is likely to attract value hunters and fuel a buy on the dip mentality.
- The EUR/USD posted a modest recovery in early trading on Friday, benefiting from the continued softening of the US dollar.
- Bolstered by recent developments from the European Central Bank, along with the Federal Reserve’s decision to hold off on raising interest rates at its latest meeting, market participants expect significant differences between the two central banks.
- While Federal Reserve System hinted at potential future rate hikes, the market remains skeptical given historical patterns of mistrust. As a result, the market is likely to continue on its established trajectory.
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Currently, any dip towards the support level formed by Thursday’s candle is likely to attract value hunters and fuel a buy on the dip mentality. The euro seems to be slowly approaching the 1.10 level, which should not be a big surprise considering the recent tightening measures by the ECB. Growing concerns over the Federal Reserve’s cautious stance suggest the US dollar may face downward pressure, particularly against the euro.
In light of this momentum, many buyers are expected to be anxious to participate in the market. As a result, shorting the euro may be challenging at this point. The key question remains whether the market can break the recent high of 1.11. Should such a breakout occur, it would likely create a buy-and-hold situation, fueling further bullish sentiment. Furthermore, the 50-day exponential Moving average (EMA) and the 200-day EMA serve as additional support levels below the current price and reinforce the overall positive outlook. While caution is warranted, given the circumstances, the prevailing bullish sentiment cannot be overlooked. A sudden reversal below the 200-day EMA would represent a substantial reversal, which would be rather unexpected at this stage.
At the end of the day, the euro proved resilient against a weaker US dollar as the market expects a growing divergence between the European Central Bank and the Federal Reserve. Despite occasional skepticism about the Federal Reserve’s statements, buyers are likely to remain active in the market. Continued bullish sentiment suggests that shorting the euro could prove challenging, while a potential break above the recent high could solidify a long-term buy position. It is very important to be cautious and watch the market movements because any unexpected movement could significantly change the current situation.