During the European trading session on Tuesday (February 27), the EURUSD fluctuated and rose slightly, currently trading around 1.0859, an increase of about 0.07%; the US dollar against the Canadian dollar was at 1.3495, a decrease of 0.07%, and the US dollar against the Japanese yen was at 1.3495 during the session. 150.358, a decrease of 0.22%.
The U.S. dollar index’s gains were capped on Monday despite a slight increase in U.S. Treasury yields. Market participants appear to be leaning toward a cautious stance ahead of Thursday’s release of a high-profile financial data release: the core PCE price index, the Federal Reserve’s preferred inflation gauge.
The market expects the U.S. core PCE in January to rise 0.4% from December, resulting in a slight decline in the annual rate from 2.9% to 2.8%, which is a small but constructive improvement. However, traders should be prepared for the official data to potentially beat expectations, which could echo trends observed in the CPI and PPI reports released earlier this month.
If the data surprises to the upside, we may see interest rate expectations rise on bets that policymakers will delay the start of the easing cycle and that the Fed will cut interest rates by less in the future once this process begins. This scenario could send U.S. Treasury yields higher, creating a favorable environment for the dollar.
Here’s a look at the technical outlook for EUR/USD, USD/CAD and USD/JPY.
EURUSD technical analysis
EURUSD broke above the 200-day simple moving average of 1.0827 on Monday, which is a positive technical development for the euro. If the pair can hold above the 200 EMA in the coming days, buyers may be bold enough to launch an attack on 1.0890. If it continues to strengthen, all eyes will be on 1.0950.
On the other hand, if market sentiment reverses in favor of sellers and prices fall decisively below the 200-day moving average, key support is expected to be at 1.0725, followed by 1.0700. If the price moves lower further, attention will turn to 1.0650.
USD/CAD technical analysis
USD/CAD edged higher on Monday after bouncing off trendline support and the 200-day simple moving average at 1.3478 late last week. If the upward momentum gains traction in the coming days, initial resistance appears at 1.3540, followed by 1.3585. Upside progress above these levels will draw attention to 1.3620.
On the other hand, if the price pivots downward, support will extend downward from 1.3485 to 1.3475. While this area is likely to provide support to the pair during a pullback, a break below this area could result in a rapid decline towards the 50-day simple moving average at 1.3415.
USD/JPY technical analysis
USD/JPY is just one step away from breaking through the key resistance level of 150.85. Traders will need to keep a close eye on this technical resistance this week, as a valid breakout could spark buying momentum and set the stage for a retest of the 152.00 handle.
On the other hand, if sellers unexpectedly take control and start bearish, support could be found at 149.70 and 148.90. Sustained declines below these important price supports could see the pair fall back to the 100-day simple moving average just above 147.50.
At 15:40 Beijing time, the euro against the US dollar was trading at 1.0856/57, the US dollar against the Canadian dollar was trading at 1.3497/99, and the US dollar against the Japanese yen was trading at 150.357/369.