Analyzing Recent Trends and Future Scenarios.

EUR: The EUR/USD pair surged last week due to disappointing U.S. economic data, breaking through the 1.0670/1.0695 resistance zone. However, its bullish momentum waned on Monday as it struggled to clear the 1.0765 technical barrier, representing the 38.2% Fibonacci retracement from July to October. The near-term outlook hinges on how the pair behaves around the 1.0765 level. If buyers breach this level and the 200-day moving average, a move towards 1.0840 is possible. Further strength could shift focus to 1.0961, the 61.8% Fib retracement. Conversely, if sellers regain control and trigger a bearish reversal, attention will turn to the 1.0695/1.0670 support. Below this level, the market may target trendline support at 1.0555, potentially leading to a descent toward this year’s lows near 1.0450.

GBP: GBP/USD also paused its upward momentum on Monday after a bullish breakout last week. This could be a temporary setback, given the evolving negative sentiment surrounding the U.S. dollar and the Federal Reserve’s apparent shift from a hawkish stance. If cable decisively resumes its upward trend and surpasses the resistance zone between 1.2450 and 1.2460, it may gain momentum for a rally toward 1.2591, marked by the 50% Fibonacci retracement of the July/October correction. On the other hand, if sellers reassert themselves, initial support lies at 1.2320/1.2310. It’s crucial for buyers to defend this level, as a failure to do so could lead to strong downward pressure, potentially driving a pullback to 1.2185 and even revisiting October lows.

USD: The broader U.S. dollar faced significant losses last week, triggered by the Federal Reserve’s failure to signal another interest rate hike. Weak U.S. labor market and ISM services data further weighed on the dollar by pushing Treasury yields lower across various maturities. Amid this backdrop, the euro, the British pound, and the Australian dollar made substantial gains against the U.S. dollar. The Japanese yen, in contrast, remained relatively stable with USD/JPY settling around 149.50. Key Fed figures are scheduled to speak today, and market expectations point to the Fed ending its rate hike cycle and considering a rate cut in June 2024. Hawkish comments on the U.S. economic outlook, inflation, and interest rates could bolster demand for the U.S. dollar. According to the CME FedWatch Tool, the probability of a December Fed rate hike has risen to 9.6%, while the chances of a June 2024 Fed rate cut have increased to 41.3%. FOMC members’ statements are likely to influence investor sentiment regarding the Fed’s rate trajectory.