The US debt ceiling negotiations remain firmly in traders’ minds, as a surprise halt in talks caused a jitter in the markets. The greenback toppled on dovish comments from Jerome Powell, enticing the EURUSD bulls to attempt a continuation of the bounce from a seven-week low in the Friday session.  

In the Eurozone, the market expects a hawkish interest rate environment to sustain, in direct contrast with the US, where a tightening in credit conditions has raised the question among policymakers of whether higher rates are justified. The EURUSD is expected to rise on the potential policy divergence, but the greenback’s safe-haven appeal is causing hesitation among the bulls. 

Technical 

The downward pressure on the currency pair is evident on the 4H chart, where a descending channel pattern has formed. While the Friday bounce triggered a bullish run, the channel resistance holds firm, preventing the bulls from breaking to the upside.  

If the bulls can enforce a breakout, resistance at $1.0836 could be the first hurdle for the bulls to cross to confirm the sustainability of the run. From there, momentum can entice a move toward $1.0852 and $1.0892.  

Conversely, if resistance continues to hold, a drop toward the daily pivot support of $1.0798 is on the cards. In the case of a breakdown, the currency pair can continue trading within the channel, where support may be found at $1.0768 before the neckline at $1.0747. 

Summary 

Channel resistance stands in the way of the EURUSD bulls to capitalise on the greenback pressure. If the bulls can break through, resistance at $1.0836 could be reached before key economic data releases from the US become available later in the week. 

Sources: Koyfin, Tradingview