CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD is captive to a range as traders await the next market mover, the US CPI data on Wednesday. 
• US inflation expectations are high while US Treasury yields have made a new high for the year. 
• The pair is trading within a narrow range between the 50, 100 and 200-day Simple Moving Averages.   

EUR/USD trades penned in, seesawing between tepid gains and losses in the 1.0850s on Tuesday. The lack of volatility could be due to many traders opting to stay on the sidelines ahead of the first big market mover for the week, the US Consumer Price Index (CPI) inflation data for March, scheduled for Wednesday.

EUR/USD traders withdraw to patiently await inflation data 

EUR/USD will likely not see much volatility until the release of CPI. Economists expect the data to show that prices in the US to have risen by 3.4% Year-on-Year in March (3.7% YoY for core goods), both of which are still well above the Federal Reserve’s (Fed) 2.0% target. A more substantial decline is required before the Fed will likely bring down interest rates from their current 5.5% level.  

For EUR/USD, the maintenance of higher interest rates in the US compared to the Eurozone is a bearish headwind. This is because relatively higher interest rates favor foreign capital inflows. 

In contrast to the Fed, the European Central Bank (ECB) is seen as more likely to cut interest rates earlier amid more subdued growth and inflation expectations. 

US Treasury Yields reach Year-to-Date Peak

US Treasury yields, a key gauge of US inflation expectations, peaked on Monday, with the 10-year Treasury Note yield reaching YTD highs of 4.46%. US yields are highly correlated to the US Dollar and, therefore, negatively correlated with the EUR/USD pair.  Since peaking on Monday, they rolled over and have been trending slightly down. 

US inflation expectations increased after the stellar Nonfarm Payrolls (NFP) jobs report released on Friday, which showed another 303K workers joining the economy in March. 

More people working usually means more people earning and spending money. This ought to be negative for EUR/USD, however, the pair has been broadly rising over the past five days. 

The release of better-than-expected German Industrial Production data on Monday may have helped the Euro at the start of the new week. 

German yields are rising faster than US yields according to Gregor Horvat of advisory firm Wavetraders, which may explain why EUR/USD keeps going higher despite the strong US data. 

Horvat uses Elliott Wave analysis, a type of cycle theory, and expects EUR/USD to continue its rally up to 1.0920 before the ECB meeting on Thursday.

Technical Analysis: EUR/USD increasingly looking range-bound

EUR/USD looks increasingly range-bound in the short-term. 

The pair failed to confirm the bearish Gravestone Doji candlestick posted on Thursday as price recovered on the following day and posted a bullish Dragonfly Doji candlestick – the one canceling out the other (shaded rectangle on chart). 

EUR/USD Daily Chart

EUR/USD now appears trapped within the pincers of three significant Moving Averages. The 50-day and 200-day SMAs are providing cushioning support at 1.0830 and 1.0831 and the 100-day SMA is showing resistance at 1.0873. 

A decisive break above the 100-day SMA would support the bullish case, and see a rally to perhaps the March 21 high at 1.0942. 

Alternatively, a decisive break below the cluster of MAs in the 1,0830s might see a  pullback evolve down to support at the April 2 swing lows of 1.0725.

• EUR/USD could retest the previous week’s high of 1.0876.
• The resistance zone appears around the 61.8% Fibo level of 1.0883 and the psychological level of 1.0900.
• The major level of 1.0850 could act as a key support, followed by the nine-day EMA at 1.0833.

EUR/USD put efforts to continue its winning streak for the sixth successive session on Tuesday. The pair hovers around 1.0860 during the Asian session. In the daily-frame chart, the pair shows that it is taking support on the nine-day Exponential Moving Average (EMA), which suggests that the pair could move upward to retest the strong resistance at the previous week’s high at 1.0876.

Furthermore, the EUR/USD pair could explore the 61.8% Fibonacci retracement level of 1.0883, followed by the psychological level of 1.0900.

Additionally, technical analysis suggests a bullish sentiment for the EUR/USD pair. The 14-day Relative Strength Index (RSI) is positioned above the 50 mark, indicating strength in buying momentum.

The lagging indicator, Moving Average Convergence Divergence (MACD), shows a divergence above the signal line, which indicates gaining strength for the pair. However, it is still positioned below the centreline. So, the traders are likely to await MACD to offer a clear trend direction.

On the downside, the EUR/USD pair could find immediate support at the major level of 1.0850, followed by the nine-day EMA at 1.0833. A break below this level could lead the pair to navigate the region around the psychological level of 1.0800 following the previous week’s low at 1.0724.

EUR/USD: Daily Chart

• EUR/USD trades in positive territory near 1.0860 on the weaker USD on Tuesday. 
• The US March CPI data on Wednesday could provide some hints about inflation trajectory and rate cut expectations. 
• The ECB is anticipated to keep its Main Refinancing Operations Rate unchanged at 4.5% at its April meeting on Thursday. 

The EUR/USD pair posts modest gains around 1.0860 during the early Asian session on Tuesday. The decline of the US Dollar (USD) provides some support to the major pair. The US NFIB Business Optimism Index and the RCM/TIPP Economic Optimism Index are due on Tuesday, along with the speech by Minneapolis Fed N. Kashkari.

The upbeat US labour market data and the strength of the US economy raised uncertainties about rate cuts from the Federal Reserve (Fed) this year. Minneapolis Fed President Neel Kashkari said last week that he penciled in two interest rate cuts this year but if inflation continues to stall, no rate cuts would be a possible scenario. Financial markets have priced in the 50% odds of rate cuts under 50% for both June and July, lower than at the beginning of April, according to the CME’s FedWatch tool.

The attention this week will shift to the US March Consumer Price Index (CPI) data on Wednesday after February’s annual inflation rate of 3.2% came in higher than expected. The stronger-than-expected figure in March data could dampen expectations for rate cuts in June, while softer inflation figures could fuel speculation for rate reductions.

 Across the pond, the European Central Bank’s (ECB) interest rate decision will be in the spotlight on Thursday. The ECB is widely expected to keep interest rates unchanged at its April policy meeting. Data released last week indicated that inflation fell unexpectedly in March, raising the expectation for ECB rate cuts. Investors will also be looking for any clues about the pace of the easing cycle once it begins. Markets believe there is a greater than 90% chance of an ECB cut in June, according to derivatives prices collected by LSEG.

• EUR/USD recovers to 1.0850 as market sentiment turns cheerful.
• The ECB is expected to keep its Main Refinancing Operations Rate unchanged at 4.5% on Thursday.
• The next move in the US Dollar will be guided by the US Inflation data for March.

The EUR/USD pair bounces back to 1.0850 in Monday’s early American session as appeal for risky assets improve. Market sentiment is positive even though traders pare bets supporting Federal Reserve (Fed) rate cuts, which were leaned for the June meeting. The S&P 500 futures open on a slightly positive note. 10-year US Treasury yields rose to four-month high near 4.43% as Fed rate cut expectations have shifted for the second half of this year.

Meanwhile, the US Dollar turns subdued despite robust US Nonfarm Payrolls (NFP) data for March dent rate cut hopes. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, falls slightly to 104.30.

Going forward, investors will focus on the US Consumer Price Index (CPI) for March, which will be published on Wednesday. Annual headline inflation is forecasted to have accelerated to 3.4% from 3.2% in February. In the same period, the core CPI that strips off volatile food and Oil prices is estimated to have dipped slightly to 3.7% from 3.8%.

Strong price pressures could keep hopes of rate cuts for June off the table, while soft figures could prompt speculation for the Fed pivoting to rate cuts in the same period.

On the Eurozone front, investors shift focus to the European Central Bank’s (ECB) interest rate decision, which will be announced on Thursday. The ECB is widely anticipated to keep its key borrowing rates steady at 4.5%. While investors will focus on more cues about when the ECB will pivot to rate cuts.

• EUR/USD could move downward to retesting the nine-day EMA at 1.0822.
• Lagging indicators suggest that the bearish stance holds strong.
• The psychological level of 1.0800 appears as the key support region.

EUR/USD snaps its four-day winning streak, declining to near 1.0830 during the early European hours on Monday. The pair could move downward to retest the nine-day Exponential Moving Average (EMA) at 1.0822.

Additionally, technical analysis suggests a bearish sentiment for the EUR/USD pair. The 14-day Relative Strength Index (RSI) is positioned below the 50 mark, indicating weakness in buying momentum.

The Moving Average Convergence Divergence (MACD) remains below the centerline and exhibits a convergence below the signal line. This alignment suggests a momentum shift for the EUR/USD pair. Traders are likely to await confirmation from this lagging indicator to provide a clearer trend direction.

The EUR/USD pair could find immediate support at the psychological level of 1.0800. A break below the latter could exert pressure on the pair to navigate the region around the major level at 1.0750, followed by the previous week’s low at 1.0724.

On the upside, the major level at 1.0850 appears as the immediate resistance, aligned with the 50.0% retracement level at 1.0852. A breakthrough above this level could lead the EUR/USD pair to explore the 61.8% Fibonacci retracement level of 1.0883, followed by the psychological level of 1.0900.

EUR/USD: Daily Chart

• EUR/USD edges lower on Monday as the upbeat US NFP continues to underpin the USD.
• A positive risk tone might cap the safe-haven buck and lend some support to the major.
• Traders now look to the US CPI, FOMC minutes and the ECB meeting for a fresh impetus.

The EUR/USD pair struggles to capitalize on Friday's goodish rebound of around 50 pips from sub-1.0800 levels and meets with a fresh supply during the Asian session on Monday. Spot prices currently trade around the 1.0825-1.0820 region and remain at the mercy of the US Dollar (USD) price dynamics, though the downside seems cushioned.

The upbeat US monthly employment data – popularly known as the Nonfarm Payrolls (NFP) report – showed that the economy added more than the anticipated, 303K jobs in March. This forced investors to scale back their bets for an eventual interest rate cut by the Federal Reserve (Fed) in June and the total number of rate cuts to two in 2024. The outlook keeps the US Treasury bond yields elevated, which, in turn, is seen acting as a tailwind for the USD and exerting some pressure on the EUR/USD pair.

That said, a generally positive tone around the global equity markets, bolstered by easing geopolitical tensions in the Middle East, might keep a lid on the safe-haven Greenback. Traders might also opt to move to the sidelines ahead of this week's key releases from the US – the latest consumer inflation figures and the crucial FOMC meeting minutes on Wednesday. This, along with the European Central Bank (ECB) meeting on Thursday, should provide some meaningful impetus to the EUR/USD pair.

In the meantime, rising bets for a June rate cut by the ECB, reaffirmed by softer Eurozone consumer inflation figures last week, might continue to weigh on the Euro and keep the EUR/USD bulls on the defensive. Hence, any recovery back towards the 100-day Simple Moving Average (SMA), near the 1.0870 region, could be seen as a selling opportunity. Traders now look to German Industrial Production and Trade Balance data, along with the Eurozone Sentix Investor Confidence Index, for some impetus.

• A robust US Nonfarm Payrolls report for March propels the Greenback higher, impacting the EUR/USD.
• The Eurozone's mixed economic indicators, including Germany's Factory Orders and Retail Sales, contrast with the strong US employment landscape.
• Further downside seen at EUR/USD as technical suggests potential for declines below the 1.0800 threshold.

The Euro registers minimal losses of 0.13% following the release of a stronger-than-expected jobs report from the United States (US) that boosted the Greenback, sending the EUR/USD lower. At the time of writing, the pair trades at 1.0822 after hitting a daily high of 1.0847.

EUR/USD slides as upbeat US labor market data fuels US Dollar rally

On Friday, the US Bureau of Labor Statistics (BLS) revealed that the economy added more jobs than expected. Nonfarm Payrolls for March rose by 303K, crushing estimates and previous readings of 200K and 270K. Further data showed the Unemployment Rate ticking lower from 3.9% to 3.8%, while Average Hourly Earnings were aligned to the consensus.

After the data, the Greenback strengthens as the US Dollar Index (DXY) rises 0.155%, up at 04.36. US Treasury bond yields are climbing between 4.5 and 5 basis points. The US 10-year Treasury note rate is at 4.365%.

Elsewhere, the Richmond Fed President Thomas Barkin commented the rpoert was quite strong, adding that the reduction in inflation has been uneven. Earlier. Fed’s Boston Susan Collins made comments but not on monetary policy.

Across the pond, Factory Orders in Germany improved in February, to 0.2%, improving from January’s -1.4% plunge. Moreover, Retail Sales from the Eurozone (EU) dived -0.5% MoM, worse than the estimated -0.4% contraction.

Given those factors, the EUR/USD retreated below the 200-day moving average (DMA). Traders' focus shifts to next week's data, with the release of US inflation data and consumer sentiment. On the EU’s front, the European Central Bank (ECB) will feature its monetary policy meeting, which will be the highlight of the week.

EUR/USD Price Analysis: Technical outlook

The formation of an ‘evening star’ chart pattern could pave the way for a drop below the 1.0800 figure. Momentum in the EUR/USD is tilted to the downside as the Relative Strength Index (RSI) aims lower and beneath the 50-midline level. A breach below 1.0800 will expose the April 2 low of 1.0724, ahead of 1.0700. On the other hand, buyers will face stirring resistance at the confluence of the 50 and 200-DMAs at around 1.0828/32.

• EUR/USD sees rally cut short on a mixture of factors including geopolitical, Fed and German macro data. 
• Middle East tensions are pushing up Oil prices, with implications for inflation. 
• Fed officials vacillate on timing of first interest-rate cut, German factory data weighs.  

EUR/USD is trading back down in the lower 1.0800s on Friday after being rejected by bears at the key 100-day Simple Moving Average (SMA) at 1.0874. 

A cocktail of risks appears to be weighing on the pair, including weaker-than-expected German data, geopolitical risks stemming from tensions in the Middle East, and recent commentary from US Federal Reserve (Fed) officials. 

The US Nonfarm Payrolls report at 12:30 GMT on Friday is the next major event likely to catalyze volatility for EUR/USD. A higher-than-expected rise in payrolls, estimated to come out at 200,000 in March, would support the US Dollar and vice versa for a miss. 

The Average Hourly Earnings component of the Labor Report could also impact the pair if it shows a substantial change in wage inflation. A rise would support USD (pushing down EUR/USD) and the opposite for a fall. 

EUR/USD: Pulls back on inflationary risks 

EUR/USD is trading down a tenth of a percent at the end of the week after German Industrial Orders data on Friday observed a steep decline at an annual rate of 10.6% in February, compared with a decline of 6.2% in January.

German Factory Order data showed orders rising 0.2% over the same period, missing economists estimates of 0.8%, but recovering from an 11.4% slump reported in January.

Rising Middle East tensions are pushing up the price of Oil, with Brent Crude now trading above $90 per barrel. This is likely to pass through into broader inflation, adding fuel to the thesis of those policymakers who push to keep interest rates elevated. 

Commentary from Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari raised the prospect the Fed might not cut interest rates at all in 2024 if inflation remained at current levels.

“If inflation continues to move sideways, it makes me wonder if we should cut rates at all this year,” Kashkari said, despite admitting to previously penciling in two rate cuts this year. 

The maintenance of higher interest rates is positive for the US Dollar as it increases foreign capital inflows. 

There appears to be more of a consensus amongst rate-setters in the Eurozone about going ahead with a proposed interest-rate cut in June, a factor weighing on the Euro (EUR). 

The decision is likely to be dependent on whether wage data released prior to the June meeting shows a decline in wage inflation.

Technical Analysis: EUR/USD ping pongs with no clear direction

EUR/USD rose up to the 100-day SMA at 1.0874 on Thursday before reversing to close flat on the day. 

In the process, a Gravestone Doji Japanese candlestick pattern was formed, with potentially bearish implications if followed by a red bearish candlestick on Friday. 

EUR/USD Daily Chart

The short-term trend is unclear with risks balanced. The 50-day SMA is providing cushioning support at 1.0827. 

A decisive break above the Gravestone Doji candlestick high at 1.0876 would neutralize its bearish implications and solidify the case for a bullish short-term trend and indicate the probability of higher prices. The March 21 high at 1.0942, provides a potential next target. 

Alternatively, if the downside continues, a pullback down to support at the previous wave B lows of 1.0798 is also quite possible.

• EUR/USD loses ground possibly due to the escalated geopolitical tensions in the Middle East.
• US Initial Jobless Claims increased to 221K against the expected 214K.
• Eurozone Retail Sales (YoY) is expected to decrease by 1.3% in February, compared to 1.0% prior.

EUR/USD persists in its downward movement that commenced on Thursday, edging closer to 1.0830 during Friday's Asian trading hours. The US Dollar (USD) remains bolstered by market caution, likely influenced by escalating geopolitical tensions in the Middle East.

This increase in tension comes in the wake of Iran's pledge to retaliate against Israel's assault on Iran's embassy in Syria, resulting in the fatalities of Iranian military personnel. Furthermore, reports highlighting heightened threats against Israeli embassies in the United States (US) by Iran have intensified market apprehensions.

However, the US Dollar (USD) faced downward pressure due to weaker employment data from the United States (US) on Thursday, supporting the EUR/USD pair. Neutral remarks from several Federal Reserve officials likely mitigated the downward trend of the US Dollar.

US Initial Jobless Claims for the week ended March 29 increased by 9,000 to 221,000, compared to the previous week's reading of 212,000, albeit below the market consensus of 214,000. Additionally, US Challenger Job Cuts for March stood at 90.309K, exceeding the previous reading of 84.638K.

On the other side, the Eurostat Producer Price Index (PPI) recorded a decline of 1.0% in February, surpassing both the expected and previous decreases of 0.7% and 0.9%, respectively. On a year-over-year basis, the index fell by 8.3%, slightly lower than the anticipated 8.6% decrease but higher than the 8.0% decline seen previously. Additionally, the HCOB Composite PMI demonstrated growth, rising to 50.3 from the previous reading of 49.9.

Recent data indicates that the annual inflation rate in the Eurozone declined more than anticipated in March. This has led to speculation that the European Central Bank (ECB) may consider cutting interest rates in June.

Traders await Germany’s Factory Orders and Eurozone Retail Sales on Friday. From the United States, Average Hourly Earnings and Nonfarm Payrolls are scheduled to be eyed.

• EUR/USD rises to 1.0858, facing resistance at the 100-day MA, influenced by US data and Eurozone PMIs.
• Rising US jobless claims and trade deficit, alongside falling Treasury yields, weigh on the Dollar.
• Fed's cautious stance on rate cuts due to inflation, and stronger Eurozone services PMIs, support the Euro.

The Euro posts solid gains against the US Dollar, though it faces stirring resistance at the 100-day moving average (DMA), which caps the pair's advance toward 1.0900. Weaker-than-expected US jobs market data and upbear services PMIs in the Eurozone (EU) sponsored a leg-up for the shared currency. The EUR/USD trades at 1.0858, up 0.21%.

EUR/USD approaches 1.0900, buoyed by Eurozone PMI strength and weak US labor market data

The Greenback is treading water after the US Bureau of Labor Statistics (BLS) revealed that Initial Jobless Claims for the week ending March 30 increased from 212K to 221K, exceeding forecasts of 214K. At the same time, the US Balance of Trade blocked a $-68.9 billion deficit, wider than expected and the previous month's reading, a headwind for the US Dollar.

US Treasury yields edged lower, as depicted by the 10-year benchmark note rate dipping to 4.31%, before resuming to 4.353%. The US Dollar Index (DXY), which tracks the currency’s value against a basket of peers, is down 0.15% at 104.06.

Federal Reserve officials crossed the wires led by Philadelphia Fed Patrick Harker, saying that inflation is too high. Recently, Richmond Fed President Thomas Barkin said the Fed could be patient regarding cutting interest rates. He’s optimistic about achieving a “soft landing,” even though he complained about recent inflation data.  In the meantime, Chicago’s Fed President, Austan Goolsbee, stated that the biggest danger to inflation is housing price pressures. He added that by keeping rates restrictive for too long, the labor market could begin to deteriorate.

Across the pond, Euro services PMIs improved across the block in March. EU Services PMI rose to 51.5, up from 50.2 in February. The German reading expanded for the first tie in six months.

Given the backdrop, traders are still projecting the first ECB rate cut in June. On the contrary, market players expect the first Fed cut for the July meeting ahead of the Jackson Hole symposium.

EUR/USD Price Analysis: Technical outlook

The EUR/USD remains neutrally biased, with price action failing to put a lower low after posting back-to-back lower highs. On the upside, the 100-DMA is key resistance at 1.0875, ahead of 1.0900. Buyers must clear those two levels if they would like to reach 1.1000. If sellers push prices below the confluence of the 200 and 50-DMAs, at 1.0833, a fall toward 1.0800 is on the cards. Further losses are seen beneath, with the next lower low swing point being the April 2 low of 1.0724.

• EUR/USD rebounds after weaker ISM Services PMI data undermines the US Dollar. 
• Services inflation in the US is proving sticky but the PMI’s Prices Paid component showed a fairly steep fall. 
• The odds of a June interest-rate cut from the Fed have recovered after the data. 

EUR/USD is rebounding and trading back above 1.0800 on Thursday, following the release of lower-than-expected ISM Services PMI data from the US. 

The data increases the probability of the Federal Reserve (Fed) cutting interest rates by June, bringing it more in line with the more concrete expectations of when the European Central Bank (ECB) will start cutting rates. 

The US Dollar (USD) suffered after the release because relatively lower interest rates or their expectation thereof are usually negative for a currency since they reduce inflows of foreign capital.  

EUR/USD: Services inflation not so sticky 

EUR/USD rebounded strongly on Wednesday after the release of ISM Services PMI for March undershot expectations. But it was probably the sharper fall in the ISM Services Prices Paid component figure, which measures inflation in the sector, which was the main driver of USD weakness. 

Services inflation is considered stickier than other types of inflation and is one of the metrics being most closely watched by the Fed as they try to decide when or whether to cut interest rates. 

ISM Services Prices Paid: Monthly 

The fall in Prices Paid to 53.4 from 58.6 prior, is a sign inflation in the sector is cooling considerably, making it more likely the Fed will cut interest rates by June. 

Indeed, this was reflected by the CME FedWatch tool, which gives a market-based probability of future Fed decisions, which is now indicating an over-60% chance of a cut by June, from a probability in the  mid-50% range on Monday.  

Technical Analysis: EUR/USD threatening to reverse short-term downtrend

EUR/USD extends its recovery from short-term seven-week lows in the 1.0720s on Thursday. 

It has now broken above a key resistance level from the swing low at the level of the B wave of the prior ABC pattern, suggesting the recovery is probably more than just a short pullback. 

Euro versus US Dollar: 4-hour chart

The established short-term downtrend is in doubt as the peaks and troughs of price start trending higher on the 4-hour chart, which is primarily used to monitor that trend. 

If price traces out one more higher low and higher high on the 4-hour timeframe, it will meet the criteria for a new uptrend, and switch the bias towards higher prices. 

A break above the key March 26 peak would be a further bullish sign. 

Should those criteria be met, the next upside target would be the 1.0940 high of March 21. 

However, price is currently encountering substantial dynamic resistance from several major Moving Averages on different timeframes which may make further upside difficult. 

As can be seen in the chart above, there are the 4-hour 100 and 200 Simple Moving Averages (SMA), as well as the 50-day and 200-day SMAs on the daily chart (not shown). 

There is still, therefore, a risk of some weakness if bears manage to push price down from this confluence of SMAs. 

The prior low at 1.0725 is the first downside target, followed by the 1.0694 February and year-to-date low.

• EUR/USD trades with a positive bias for the third successive day on Thursday.
• The Fed rate cut uncertainty continues to weigh on the USD and lend support.
• The technical setup warrants caution for bulls and positioning for further gains.

The EUR/USD pair attracts some buyers for the third successive day on Thursday and climbs to a one-and-half-week top, closer to mid-1.0800s during the Asian session.

The US Dollar (USD) extends this week's corrective decline from the highest level since February 14 amid the uncertainty over the Federal Reserve’s (Fed) rate cut path. Apart from this, a positive risk tone is seen as another factor undermining the safe-haven Greenback and acting as a tailwind for the EUR/USD pair. That said, expectations that the European Central Bank (ECB) will cut interest rates in June, bolstered by softer-than-expected Eurozone consumer inflation figures on Wednesday, might keep a lid on any further gains for the currency pair.

From a technical perspective, the overnight breakout through the 38.2% Fibonacci retracement level of the March-April slide and a subsequent strength beyond the 200-day Simple Moving Average (SMA) favours bullish traders. That said, oscillators on the daily chart – though have been recovering from lower levels – are yet to confirm a positive outlook and warrant some caution before positioning for additional gains. Hence, any further move up beyond the mid-1.0800s is likely to confront stiff resistance near the 1.0880 region, or the 100-day SMA.

The aforementioned area coincides with the 61.8% Fibo. level, which if cleared decisively will set the stage for a further near-term appreciating move. The EUR/USD pair might then surpass the 1.0900 mark and test the next relevant resistance near the 1.0920-1.0925 area before eventually climbing to the 1.0950 supply zone. The momentum could extend further towards the March monthly swing high, around the 1.0980 level, en route to the 1.1000 psychological mark. The latter should now act as a key pivotal point.

On the flip side, weakness below the 38.2% Fibo. level, around the 1.0825-1.0820 region, now seems to find some support near the 1.0800 mark. This is followed by the 1.0785-1.0780 area, or the 23.6% Fibo. level, below which the EUR/USD pair could aim back to challenge a one-and-half-month low, around the 1.0725 region touched earlier this week. Some follow-through selling, leading to a breakdown through the 1.0700 mark, will shift the bias in favour of bearish traders and set the stage for the resumption of a one-month-old downtrend.

EUR/USD daily chart

• EUR/USD recovers to 1.0840 amid the weaker US Dollar. 
• The US ISM Services PMI eased to 51.4 in March from 52.6 in February, weaker than expected. 
• Eurozone HICP inflation fell further than expected in March, triggering the possibility that the ECB will cut rates in June.

The EUR/USD pair extends recovery and flirts with the 100-day Exponential Moving Average (EMA) around 1.0840 on Thursday during the early Asian session. The sell-off in the USD Index (DXY) to 104.00 support after the weaker-than-expected US March ISM Services PMI data provide some support to the major pair. Investors await the final HCOB Services PMIs in Germany and the euro area, along with the US February Balance of Trade and weekly Initial Jobless Claims.

Business activity in the US service sector expanded slower in March. According to the Institute for Supply Management (ISM) on Wednesday, the US Services Purchasing Managers Index (PMI) eased to 51.4 in March from 52.6 in February, weaker than the expectation of 52.7. A measure of prices paid by businesses for inputs dropped to a four-year low, coming in at 53.4 versus 58.6 prior. In response to the data, the US Dollar (USD) faced some selling pressure and dropped to 104.25. 

Additionally, data released from Automatic Data Processing (ADP) revealed that private sector employment in the US rose by 184K in March from the 155K increase (revised from 140,000) in February, above the market consensus of 148K. 

On the other hand, the Eurozone annual rate of inflation fell further than expected in March, triggering the possibility that the ECB will cut interest rates in June. ECB policymaker Pablo Hernandez de Cos said on Wednesday that he is not explicitly giving forecasts on future monetary policy, but recent inflation data is compatible with our mandate of an inflation objective. He added that the ECB could start cutting interest rates in June after a continued slowdown in inflation in the bloc. Meanwhile, the ECB policymaker Robert Holzmann said the central bank could start cutting interest rates in June as inflation may fall quicker than expected, but should not get too far ahead of the US Fed. 

On Wednesday, the Eurozone annual Harmonized Index of Consumer Prices (HICP) climbed 2.4% in March, easing from a 2.6% increase in February, missing the market estimation for a 2.6% rise in the reported period. However, the impact on the Euro following the Eurozone inflation data has been marginal.

• The Euro jumps on Wednesday with the US Dollar dropping across the board.
• The unexpected decline of the US ISM Services PMI has eased concerns about a hawkish turn by the Fed.
• Earlier on Wednesday Eurozone CPI reflected softer-than-expected price pressures in March.

The Euro is going through a sharp recovery in Wednesday’s US trading session. The pair has rallied about 60 pips following weaker-than-expected US services sector’s activity, which has eased fears of a hawkish steer by the Federal Reserve.

Data released by ISM Insitute revealed that business activity in the services sector slowed down to 51.4 in March from 52.6 in the previous month, against expectations of a slight acceleration to 52.7. Beyond that, the Prices Paid sub-index has dropped to 53.4 from 58.6 in February and 64 in January confirming the disinflationary trend in the sector.

The PMI figures have offset the impact of a strong ADP report, which suggests a resilient labour market ahead of Friday’s Nonfarm Payrolls report. later on Wednesday Atlanta Fed President Bostic and Fed Chair Powell have cooled hopes about imminent rate cuts, yet with no significant impact on the pair.

During the European Session, the Eurozone CPI figures confirmed the soft inflation readings seen in Germany on Tuesday. The Core Inflation has declined below the 3% yearly rate, with the headline CPI easing to 2.4%, well below the 2.6% foreseen by the market. These figures pave the path for the ECB to cut rates over the coming months, although the impact on the Euro has been marginal.

• EUR/USD is rebounding from intraday-chart oversold lows. 
• Eurozone inflation data on Wednesday could impact interest-rate expectations and the exchange rate. 
• The recovery could rise a little further but the short-term trend remains bearish.   

EUR/USD is edging higher on Wednesday, making it back into the 1.0770s and extending the previous day’s rebound from six-week lows. It is still too early to say whether the move is corrective in nature or a reversal of the dominant short-term downtrend – but probably the former. 

The pair has been bearish since the second week of March, mainly on the back of shifting expectations regarding the outlook for interest rates in Europe and America. In the US, borrowing costs are expected to remain higher for longer, supporting the US Dollar (USD), since higher interest rates attract more foreign capital inflows. This view is unlikely to change much. 

EUR/USD: It’s all down to interest rate expectations

On both sides of the Atlantic inflation has been falling, removing the necessity for high interest rates. However, in the US the process has been slower and experts are not as confident it is on its way down to the Fed’s 2.0% target in a sustainable fashion. 

Most economists had expected both the European Central Bank (ECB) and the US Federal Reserve (Fed) to begin cutting interest rates at about the same time, in June or thereabouts. However, more recently the outlook has started diverging, with the Fed seen as possibly delaying and the ECB as bringing forward the moment.  

EUR/USD rebounded from six-week lows in the 1.0720s on Tuesday although it is unclear what prompted the move. It may have been predominantly technical in nature due to indicators reaching oversold readings on intraday charts. 

It is also possible that commentary from Federal Reserve Bank of San Francisco President Mary Daly may have contributed marginally to the recovery as she struck a dovish tone, saying “three rate cuts this year as a ‘reasonable’ baseline,” although she added that three rate cuts was “not a promise.” However, there was no immediate reaction from prices when her words hit the wires. 

The HCOB Eurozone Manufacturing PMI could also have provided a catalyst for EUR/USD’s recovery, after it was revised up to 46.1 in March from a flash estimate of 45.7. However, it remains below 50 and therefore in contraction territory. Additionally, the US ISM manufacturing PMI on Monday was even better and actually rose above 50 to 50.3 in March – reaching growth territory for the first time since November 2022. 

On the horizon

On Wednesday, EUR/USD could be impacted by Eurozone inflation data when the Harmonized Index of Consumer Prices (HICP) and the Unemployment Rate are released at 09:00 GMT. If HICP inflation is shown to have cooled considerably then it could weaken the pair as it will increase the chances of an even earlier interest-rate cut from the ECB, raising even the possibility of a cut in April. 

German inflation data, which came out on Tuesday, ticked lower to 2.2% YoY in line with expectations and below the 2.5% in February. The German Harmonized Index of Consumer Prices, however, fell short of expectations at 2.3%, suggesting a risk of a similar weakness for Eurozone-wide HICP. 

In the US the main data release on Wednesday will probably be ADP Employment Change at 12:15 GMT, seconded by the final S&P Global Services PMI and the ISM Services PMI. Services inflation is seen as one of the stickiest components in the CPI basket so markets may pay extra attention if the real figure diverges from expectations. 

More Fedspeak is also in the offing with Fed's Bowman, Goolsbee, Barr, Kugler, and Powell all due to speak.

Technical Analysis: EUR/USD bounces off new lows

EUR/USD rebounded from short-term multi-week lows in the 1.0720s on Tuesday and in the process formed a bullish Piercing Line Japanese candlestick reversal pattern on the daily chart. This occurs when price makes a new low but on the same day recovers and closes above the midpoint of the previous day. 

The pattern could indicate a temporary continuation of the rebound higher, with the next key resistance coming into play at the resistance level from the swing low (and B wave low of the prior ABC pattern) at 1.0798. 

Euro versus US Dollar: Daily chart

The pair is in a short-term downtrend, however, and this is likely to continue once the pullback runs out of steam. 

The 1.0694 February and year-to-date lows are an obvious next target to the downside and also likely to provide substantial support, with a bounce likely at the first test. A decisive break below, however, would usher in another bout of weakness, and target the 1.0650s. 

A decisive break is one characterized by a long red down candle breaking cleanly through the level and closing near its low, or three consecutive red candles breaching the level.

• EUR/USD extends gains towards the psychological barrier of 1.0800.
• Technical analysis indicates a potential confirmation of bearish momentum for the pair.
• The key support appears around March’s low of 1.0767 and the major level of 1.0750.

EUR/USD continues its winning streak for the second consecutive session on Wednesday, inching higher to near 1.0780 during the Asian hours. The immediate resistance appears at the 23.6% Fibonacci retracement level of 1.0785.

A breakthrough above this level could exert upward support for the EUR/USD pair to explore the region around the nine-day Exponential Moving Average (EMA) at 1.0798, aligned with the psychological resistance of 1.0800. Further resistance lies at the major level of 1.0850, following the psychological resistance at 1.0900.

Technical analysis suggests a bearish sentiment for the EUR/USD pair. The 14-day Relative Strength Index (RSI) is positioned below the 50 mark, indicating weakness in buying momentum. Additionally, the Moving Average Convergence Divergence (MACD) shows a divergence below the signal line and remains below the centerline. Although a lagging indicator, this alignment indicates a confirmation of the bearish momentum for the EUR/USD pair.

On the downside, immediate support appears at March’s low of 1.0767, followed by the major support at 1.0750. A break below this level could lead the EUR/USD pair to revisit the weekly low of 1.0724, followed by psychological support at the 1.0700 level.

EUR/USD: Daily Chart

• EUR/USD trades softer around 1.0765 despite the softer US Dollar. 
• Futures traders expect the US Fed to start easing in the June meeting. 
• The German HICP figure rose 2.3% YoY in March, its lowest level since June 2021. 

The EUR/USD pair clings to mild losses near 1.0765 after bouncing off the multi-week lows near 1.0720 on Wednesday. The weaker US Dollar Index (DXY) below the 105.00 mark provided some support to the major pair. However, the softer German inflation data on Tuesday weighs on the Euro as it has triggered the speculation of rate cuts from the European Central Bank (ECB). Investors await the advanced Eurozone inflation data for March and the US ISM Services PMI for fresh impetus. 

The dovish comments from many Federal Reserve (Fed) officials weigh on the Greenback. Cleveland Fed President Loretta Mester said on Tuesday that she expects rate cuts this year, but ruled out the next policy meeting in May. Meanwhile, San Francisco Fed President Mary Daly, stated she thinks three rate cuts in 2024 seem "reasonable,"  but she needs more convincing evidence to confirm it. Futures traders anticipate the US Fed to start easing in the June meeting and to cut by three-quarters of a percentage point by the end of the year.  

German inflation eased slightly more than expected in March, the lowest in almost three years, the German statistics office Destatis reported on Tuesday. The preliminary German Harmonized Index of Consumer Prices (HICP) rose 0.6% MoM in March, slightly below the estimation of a 0.7% MoM rise. The year-on-year rate of HICP rose 2.3%, below the market consensus of 2.4%. The softer inflation indicated Germany is nearing the European Central Bank's (ECB) target of 2%, raising market hopes for an imminent interest rate cut. This, in turn, exerts some selling pressure on the Euro (EUR) and creates a headwind for the EUR/USD pair. 

Economists at ABN Amro analyze EUR/USD outlook.

Expectations for Fed/ECB policy to continue to drive the direction in EUR/USD

EUR/USD finds support in low 1.0700s. Economists at Scotiabank analyze the pair’s outlook.

Intraday price action is mildly bullish

See – EUR/USD: The 1.0695/1.0700 lows seen in mid-February are an obvious short-term target – ING