The EUR/USD pair has resumed its descent, navigating a less confident pullback to the vicinity of 1.0950 in the early European session. A somber market mood prevails, primarily driven by apprehension ahead of impending United States labor market data.
In the Asian session, S&P500 futures exhibit subdued movement, reflecting a cautious stance among market participants as they await crucial economic indicators.
The US Dollar Index (DXY) has rebounded, nearing 102.60, as the likelihood of an interest rate reduction from the Federal Reserve (Fed) in March diminishes. Market sentiment is shifting, with participants reevaluating expectations of rate cuts in light of the robust economic outlook for the US.
Turning attention to the Eurozone, investors anticipate the release of preliminary Harmonized Index of Consumer Prices (HICP) data for December at 10:00 GMT. The inflation data is anticipated to show an increase due to base effects, providing European Central Bank (ECB) policymakers with support for a prolonged period of higher interest rates.
The EUR/USD pair is currently trading within a Rising Channel chart pattern on a four-hour scale, where each pullback is perceived as a selling opportunity by market participants. The asset is on a downward trajectory towards the lower boundary of the aforementioned chart pattern, having corrected to the vicinity of the 200-period Exponential Moving Average (EMA) at around 1.0913.
The Relative Strength Index (RSI) (14) has descended into the bearish range of 20.00-40.00. A potential recovery is anticipated, considering the overall positive sentiment, and a lower RSI (14) reading is viewed as oversold.
A new buying opportunity may emerge if the asset corrects further towards the lower limit of the Rising Channel, approximately at 1.0878. This scenario could propel the asset towards the December 20 low at 1.0930, followed by the January 4 high at 1.0972.
Conversely, a downside scenario may unfold if the asset drops below the November 17 low at 1.0825. In such a case, a further decline could lead to levels around the September 12 high at 1.0770 and the December 8 low at 1.0728.
