The Support at 1.07 Holds for EUR/USD After First Test
The Euro has turned bearish again this week with the Euro to Dollar rate falling to 1.07, which is holding as support. The US inflation numbers for January came in stronger than expected again, giving the USD a boost, wile Treasury yields have jumped around 15 pips higher.
Looking at the H4 chart, we see that the downtrend has been pretty straightforward, with moving averages serving as resistance, preventing upward retracements from gaining momentum. First the 200 SMA (purple) turned into resitance and now the 50-period Simple Moving Average (yellow) has taken over. Last week retrace higher stopped at this moving avrage and today the 50 SMA stopped the spike again before the price reversed down.
ECB and FED Policies Keeping EUR/USD Bearish
The Euro itself is facing downward pressure against the US dollar amidst expectations of interest rate cuts by the European Central Bank (ECB) as ECB members keep reiterated the possibility of rate cuts. While the USD side is gaining momentum, contributing to the negative sentiment surrounding EUR/USD, particularly with the looming possibility of ECB interest rate cuts.
The price tumbled almost 100 pips lowe today, reaching its lowest level since in three months. However, we saw a bounce from this support zone which held as the price in the previous two months. The market sentiment is also influenced by mild bids in the stock market after the crash at the open.
Looking ahead, the Federal Reserve must navigate the economic landscape it faces. Some Fed members may advocate for maintaining interest rates higher for a longer period or even considering further rate hikes. The upcoming CPI data before the March dot plot will provide additional insight, but based on the current circumstances, many Fed officials may lean towards fewer rate cuts. Regarding the euro, the lack of compelling reasons to buy it is evident. The currency grapples with its own challenges, including potential ECB interest rate cuts, which further weigh on its attractiveness in the market.
EUR/USD Live Chart
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