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The EURUSD pair has been navigating challenging waters in recent weeks, experiencing a decline of more than 5% since mid-July. This decline has primarily been due to the USD’s strength, as the Federal Reserve remains firm in its commitment to maintaining higher interest rates for longer to bring down inflation.
Last week marked a critical turning point for EURUSD as it breached a crucial trend level. The ascending channel that had been in place since early 2023 was broken, resulting in a swift price decline to around 1.07. Presently, the pair is sitting precariously on an important horizontal support level.
The significance of this support level cannot be overstated. Failure to hold at this level could lead to further downward movement, with the next support zone around the 1.05 mark. This impending test of support comes at a pivotal moment as the market eagerly await the release of the US Consumer Price Index (CPI) data later this week.
The upcoming CPI data will be the main event for USD traders this week. A decline in inflation could potentially soften the USD, suggesting that the Fed might consider an earlier-than-expected rate cut. On the other hand, if inflation exceeds analyst estimates, it may bolster the USD’s strength, potentially causing the EURUSD pair to breach its current support level and head towards lower levels.
As we approach the release of the CPI data, all eyes are on this key economic indicator. Its outcome will
undoubtedly serve as a pivotal driver of direction for the EURUSD pair this week.
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