EURUSD price action and fundamentals for the upcoming week

Shortly about EURUSD price action at the moment:

EURUSD is still trying to find direction. This week we will have plenty of first importance data that can affect markets a lot. As usual, the first week of the month is important as the US releases job market reports, including the unemployment rate, NFP payrolls, and monthly salary increment data. Additionally, this week we will have ECB and FED rates decisions.

Investors are fairly certain that the US Federal Reserve will raise its policy rate by 25 basis points at the upcoming meeting, and S&P Global's PMI surveys did little to change that view. Meanwhile, European Central Bank (ECB) Governing Council member Pierre Wunsch told the Financial Times that they will need to continue to hike rates until they monitor a slowdown in wage growth. Markets expect a 50 bps rate increase, which would bring it to a total of 4%, and this scenario may already be priced in for the EURUSD rate.

Another important factor to watch is the market reaction to First Republic Bank's problems. If a buyer is found for the bank, it may calm markets, but there are also risks for other regional banks in the US, which could affect risk aversion in the markets.

EURUSD is currently moving within the same 1.05-1.11 range. Until the market fully breaches the 1.11 level with a breakout, we may potentially see false breakouts. Interest rate differentials also show signals of false breakout to the upside, and we have a chance of seeing a larger correction in the EURUSD.

If the problems with First Republic Bank are solved, the ECB may be more hawkish than the FED, which could support further upside movement for the EURUSD. Nevertheless, market participants understand that these central banks are nearing their peak with their interest rate increases, but that doesn't mean that we will return to a zero policy rate situation any time soon.