Chart of the day: EURUSD

In spite of hawkish comments made by Fed members regarding rate hikes recently, the US dollar has been weakening against the euro this week. More and more members of the US central bank say that four rate hikes may be appropriate this year with consensus emerging that March will be a good time to deliver the first 25 bp increase. On the other hand, it was expected that reduction in the balance sheet will begin shortly after or even at the same time as the first rate hike. Meanwhile, Fed Chair Powell said on Tuesday that such a move is more likely to come in the second half of the year rather than in the first. This could have taken some steam out of the USD. Investors will hear from Lael Brainard today at 3:00 pm GMT as she will appear in the US Senate for confirmation hearings on the Vice Fed Chair nomination. In a pre-released text of the testimony, Brainard said that inflation is high and one of the most important tasks for the Fed is to bring it back to the target.

Taking a look at the EURUSD chart, we can see that the pair has managed to break above the upper limit of an ascending triangle pattern at 1.1370. Textbook range of the upside breakout from the pattern is around 200 pips, pointing to a potential upward move towards 1.1570 pts area. However, the key resistance to watch ahead is marked with the upper limit of a large Overbalance structure, that coincides with the 50% retracement of the downward move started at the end of 2020 (1.1750-1.1760 area).

Source: xStation5

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