The factor of change in market sentiment became the driving force of trade last week when the focus was on the war between Iran and Israel which continued to heat up.
The US dollar strengthened when market sentiment was at risk but did not appear to show significant strengthening.
This week, some economic data of the United States (US) will be published which will focus on the Federal Reserve (Fed) in setting their monetary policy which will also influence the movement of the US dollar.
If observed on the chart of the EUR/USD currency pair last week, the price moved in a range of 100 pips between the resistance of 1.07000 and the support level of 1.06000.
The horizontal movement indicates that prices are taking a momentary 'break' from the plunge pattern that occurred the previous week when the reaction to US inflation data was published.
Investors will be watching to see if last week's move in the horizontal zone will break through either price resistance or support to determine the direction of further movement.
This will depend on the reaction to the latest published data including the US Gross Domestic Product (GDP) data as well as the PCE price index.
If the price rally takes place and breaks through the resistance at 1.07000, it is likely that the price will show a bullish pattern this week, expecting a pullback on the US dollar.
A move higher will target 1.08000 to be reached before a reaction at that level is observed to assess further moves.
But if there is a price drop, the support level of 1.06000 will once again be tested this week.
If finally the price breaks down, the previous bearish trend will continue with the expectation that the price can reach up to around 1.05000.
