CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD gains ground on dovish remarks from the Federal Reserve.
• Fed Chair Powell underscored the persistent nature of price growth remains a significant concern.
• ECB’s Lagarde underscored concerns regarding lower wage inflation.

EUR/USD extends its gains for the second consecutive session as the US Federal Reserve (Fed) maintained its benchmark rates at 5.5% during Wednesday's policy meeting. The pair rises to near 1.0930 during the Asian trading hours on Thursday.

In the post-meeting press conference, Federal Reserve (Fed) Chair Jerome Powell's remarks, indicating a dovish stance, further weighed down the Greenback. Powell underscored that while inflation is exhibiting signs of moderation, the persistent nature of price growth remains a significant concern that the Fed cannot overlook.

Investor sentiment reflects expectations of further easing measures in 2024, despite the Federal Open Market Committee (FOMC) projecting stronger growth throughout 2024 and 2025 than initially anticipated. Notably, the FOMC's Dot Plot of interest rate expectations also saw an uptick in the long tail end of the curve. The rate is forecasted to reach around 3.1% in end-2026, compared to the previous projection of 2.9%.

On the European front, President of the European Central Bank (ECB), Christine Lagarde, underscored concerns regarding lower wage inflation, a factor previously emphasized by the ECB as pivotal in determining future policy decisions.

Additionally, the Vice-President of the ECB, Luis de Guindos, cautioned against premature action, stating that a wait-and-see approach is warranted due to persistently high service inflation. Echoing this sentiment, ECB policymaker Pablo Hernandez de Cos hinted at the possibility of rate cuts in June, contingent upon incoming data.

• EUR/USD bumped towards 1.0900 after Fed held steady.
• Fed Dot Plot still sees 75 bps in 2024.
• Fed expects rates to be held higher by end of 2026.

EUR/USD jumped on reaction to the Federal Reserve’s (Fed) latest rate call, which held rates at 5.5% as markets had broadly predicted. Investor expectations are pricing in additional easing in 2024, despite the Federal Open Market Committee seeing stronger growth through 2024 and 2025 than initially expected. The FOMC’s Dot Plot of interest rate expectations also saw a rise in the long tail end of the curve, with end-2026 rates now forecast to land somewhere around 3.1% versus the previous 2.9%.

The Fed is now projecting a higher long-term policy rate through December, ticking up to 2.6% from 2.5%, but markets are shrugging off the Fed’s growth expectations to push down the US Dollar (USD), sending the Euro (EUR) higher. EUR/USD crossed 1.0890 following the market’s pre-baked reaction to the Fed’s rate call. Investors will now buckle down for the short wait to Fed Chairman Jerome Powell’s press conference slated for the bottom of the hour at 18:30 GMT.

Read more: Fed leaves interest rate unchanged at 5.25%-5.5% as forecast

EUR/USD 5-minute chart

Economists at ING expect the EUR/USD pair to trend higher throughout the second half of 2024.

The Fed is the single most important driver of EUR/USD

EUR/USD held steady below 1.0900. Economists at Commerzbank analyze how the Fed decision could impact the pair.

‘Dot plot’ is where the greatest potential for a decent Dollar movement lies

EUR/USD dips back to the lows 1.0800s. Economists at Scotiabank analyze the pair’s outlook.

The short-term downtrend is gathering momentum

• EUR/USD recovers and oscillates in a range in the upper 1.0800s ahead of Wednesday’s Fed meeting. 
• Speculation is mounting that the Fed could alter how many interest rate cuts it expects to make in 2024. 
• Several ECB rate-setters are scheduled to take the stand at a conference on monetary policy.
   

EUR/USD seesaws between tepid gains and losses on Wednesday, forming a range in the upper 1.0800s after rebounding from Tuesday’s 1.0830 lows on increased probabilities the Federal Reserve (Fed) will cut interest rates by June.  

Interest rates, set by central banks, are a key driver of foreign exchange markets.  Lower interest rates tend to depreciate a currency by attracting less foreign capital inflows and vice versa for higher interest rates. 

EUR/USD rebounds as June bets pick up

EUR/USD has recovered marginally ahead of the Federal Reserve’s March Federal Open Market Committee (FOMC) meeting on Wednesday, the outcomes of which will be announced at 18:00 GMT. Bets that the Fed will start cutting interest rates – currently at 5.25%-5-50% for the Fed Funds Rate – by June are increasing.  

According to the CME FedWatch Tool, which uses Fed Fund Futures to calculate the probability of future changes in the Fed Funds Rate, the probability of the Fed cutting rates by June is 64.0%, and 78.9% by July. 

This marks an increase from the 55.1% and 73.7%, respectively, seen on Tuesday. This change in expectations could be responsible for the recovery in EUR/USD, which measures the value of a Euro in US Dollars. 

Fed could change forecasts 

The Fed is not expected to alter interest rates at its meeting but there is a chance it could revise its quarterly forecasts and accompanying statement. This could change the outlook for interest rates and therefore the US Dollar (USD) valuation. 

EUR/USD could see volatility after the Fed meeting. Speculation is mounting that the Federal Reserve will revise its economic forecasts in the Summary of Economic Projections (SEP), and the “dot plot”, which reflects the Board of Governors of the Fed’s consensus of the future path of rates. 

In the previous SEP, officials forecast three 25 basis points (0.25%) rate cuts in 2024 but some analysts now think there is a material risk that this could be revised down to two 25 bps cuts to reflect inflationary pressures remaining elevated. 

“The summary of economic projections will be updated and contains hawkish risks in our assessment with the committee potentially projecting fewer cuts in 2024,” says David Doyle, head of economics at Macquarie, in a note about the Fed meeting. 

ECB speakers set to take the stand

In Europe, a similar debate is going on about when to begin cutting interest rates, with two camps emerging – those who favor waiting until the European Central Bank’s June meeting to decide (the official camp) and a smaller mutineering group who want to keep alive the possibility of an early spring rate cut. 

On Tuesday, Vice-President of the European Central Bank (ECB), Luis de Guindos, maintained allegiance with the June camp after he said “we have to wait,” because “services inflation” remains too high. 

Wednesday will see a host of ECB talking heads appear in public who could provide further intelligence on which way the ECB is swinging. This may also impact EUR/USD volatility. 

The ECB President Christine Lagarde, ECB Chief Economist Philip Lane and ECB Executive Board member Isabel Schnabel are all set to speak at an "ECB and its Watchers" conference today, with Lagarde kicking off at 8.45 GMT, Lane at 9.30 and Schnabel at 13:45. 

Later, the President of the Bundesbank, Joachim Nagel, is scheduled to take the podium at a  “Future of European Finance" conference at the ASKO Europa-Stiftung Foundation.

Technical Analysis: EUR/USD falls below key level 

EUR/USD has penetrated below the level of the 1.0867 swing lows and in doing so probably reversed the direction of the short-term uptrend. Now the odds slightly favor more losses. 

 Euro versus US Dollar: 4-hour chart

Subject to fundamentals, the price will probably continue to fall to the next key support level at roughly 1.0800 – the lows of wave B of the Measured Move that unfolded in February and early March. 

Thursday’s sell-off fell to a low of 1.0835 before recovering and thereby forming a bullish Japanese hammer reversal candlestick pattern on the 4-hour chart. This was followed by a little move higher. Since candlesticks are only short-term patterns, this upside could be at risk of petering out. 

The daily chart below is showing the Moving Average Convergence/ Divergence (MACD) momentum indicator crossing over the signal line, giving a bearish sell signal, and adding further evidence to a change of trend. 

However, it is also flagging up some key barriers to progress lower in the form of dynamic support from the red 50-day and then the green 200-day Simple Moving Averages (SMA). 

 Euro versus US Dollar: Daily chart

On Tuesday price penetrated the 50-day SMA situated at 1.0848 but was repulsed by the 200-day SMA at 1.0839. As on the 4-hour chart, the price recovered and formed a hammer candlestick on the daily chart as well. 

For confirmation of the hammer’s bullish reversal potential, Wednesday needs to end on a bullish note as a green candlestick. If that is the case, EUR/USD is likely to continue its recovery higher.

EUR/USD ended lower on Tuesday despite a bounce in the German ZEW investor survey back to levels last seen in early 2022. Economists at ING analyze the pair’s outlook ahead of the FOMC meeting.

ECB big hitters on the wire today

• EUR/USD attracts some buyers and moves away from a two-week low set on Tuesday.
• The technical setup warrants some caution for bullish trades ahead of the Fed decision.
• A sustained break below the 1.0835 confluence should pave the way for deeper losses.

The EUR/USD pair edges higher during the Asian session on Wednesday and for now, seems to have snapped a two-day losing streak to a nearly two-week low, around the 1.0835 region touched the previous day. Spot prices, however, lack follow-through buying as traders seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the outcome of the highly anticipated two-day FOMC policy meeting later today.

The Federal Reserve (Fed) is widely expected to keep rates at their historic highs, though might lower its projection for rate cuts in 2024 to two from three previously in the wake of still-sticky inflation. Hence, the focus will remain glued to the so-called "dot plot", which, along with Fed Chair Jerome Powell's remarks, will be scrutinized for cues about the future rate-cut path. This, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide a fresh directional impetus to the EUR/USD pair.

From a technical perspective, the recent pullback from the 1.0980 region, or the highest level since January 12 touched earlier this month, stalled near the 1.0835 confluence support. The said area comprises the very important 200-day Simple Moving Average (SMA) and the 50% Fibonacci retracement level of the February-March positive move, which might continue to protect the immediate downside and act as a key pivotal point. A convincing break below will be seen as a fresh trigger for bears and drag the EUR/USD pair lower.

Given that oscillators on the daily chart have just started gaining negative traction, spot prices might then accelerate the fall to the 1.0800 mark, or the 61.8% Fibo. level, en route to the 1.0760-1.0755 region. Some follow-through selling could make the EUR/USD pair vulnerable to retesting sub-1.0700 levels, or the YTD low touched on February 14.

On the flip side, any subsequent move up is likely to confront stiff resistance near the 1.0900 round-figure mark, nearing the 23.6% Fibo. support breakpoint. A sustained strength beyond will suggest that the corrective pullback has run its course and lift the EUR/USD pair back to the monthly peak, around the 1.0980 region. The momentum could get extended further beyond the 1.1000 psychological mark, towards the next relevant hurdle near the 1.1040 zone.

EUR/USD daily chart

• EUR/USD trades flat around 1.0865 near multi-week lows amid the consolidation of the USD. 
• The FOMC is expected to hold the interest rate and maintain macroeconomic projections at its March meeting on Wednesday. 
• The Eurozone ZEW Economic Sentiment came in at 33.5 in March vs. 25.0 prior, better than expected. 
• The FOMC monetary policy meeting will be in the spotlight on Wednesday. 

The EUR/USD pair trades on a flat note above the mid-1.0800s during the early Asian session on Wednesday. Meanwhile, the USD Index (DXY) consolidates its gains near three-week highs of 103.80. Traders await the Federal Open Market Committee's (FOMC) monetary policy meeting later in the day and will take more cues from Chairman Jerome Powell’s press conference and economic projections after the meeting. At press time, the major pair is trading at 1.0865, unchanged for the day. 

The Federal Open Market Committee (FOMC) is widely expected to keep its key federal funds interest rate unchanged in a range of 5.25% to 5.5%.and maintain macroeconomic projections at its March meeting on Wednesday. Analysts anticipate FOMC’s Powell to reiterate that the central bank wants to see evidence of inflation data in its battle against inflation before cutting rates. Financial markets expect a 25 basis points (bps) rate cut in July and total cuts of 100 bps this year. The US Dollar (USD) has attracted some buyers in the last sessions as the market’s expectations for rate cuts have been dialed back. 

Across the pond, the ZEW Economic Sentiment for the Eurozone rose to 33.5 in March from the previous reading of 25.0, above the market consensus of 25.4. Meanwhile, the Economic expectations for Germany improved to 31.7 versus 19.9 prior. The reports suggested a more optimistic outlook for the Eurozone and Germany. However, the survey failed to boost the Euro (EUR) as traders prefer to wait on the sidelines ahead of the FOMC interest rate decision. 

The European Central Bank (ECB) President Christine Lagarde is set to speak on Wednesday, and the European Commission will release its flash Consumer Confidence report for March. The FOMC monetary policy meeting will take center stage later on Wednesday. After the meeting, the attention will turn to Powell’s press conference, which might provide information on the central bank's outlook. 

• Euro losses a step vs US Dollar, eyes on Fed decision.
• US housing gains, Building Permits, and Housing Starts rise.
• Germany’s ZEW and EU surveys beat expectations, uplifting investor sentiment.

The Euro remains on the defensive against the US Dollar as market participants await March’s monetary policy decision by the Federal Open Market Committee (FOMC) on Wednesday. Therefore, the EUR/USD trades at 1.0859 and loses 0.12%.

EUR/USD dips amid central bank movement, positive US housing data

Tuesday’s session witnessed two major central banks' decisions. The Bank of Japan (BOJ) exited from negative interest rates, though delivered a dovish hike, which weakened the Japanese Yen (JPY) against most G8 currencies. The Reserve Bank of Australia (RBA) holds rates unchanged at 4.35%, with the RBA still considering a rate hike if inflation reaccelerates.

Aside from this, Wall Street prints decent gains as global bond yields drop. The US economic docket showed the housing sector is gathering steam. US Building Permits in February grew 1.9%, MoM, up from 1.489 million to 1.496 million. At the same time, Housing Starts for the same period exceeded estimates of 8.2%, increasing by 10.7%.

In the meantime, the US 10-year Treasury bond yield retreats two basis points, down to 4.034%. The US Dollar Index (DXY), a gauge of the buck’s value against a basket of other currencies, gains 0.23%, up at 103.82.

On the Eurozone’s (EU) front, Germany published the March ZEW Survey, which improved the country to 31.7, while the EU one surged to 33.5, beating estimates.

EUR/USD Price Analysis: Technical outlook

The EUR/USD daily chart suggests the pair is neutral to downward biased, though dynamic support levels like the 200, 100, and 50-day moving averages (DMAs) capped the Euro’s losses, opening the door for a recovery. If buyers lift the exchange rate above 1.0900, it could expose the March 13 high at 1.0964. followed by the year-to-date (YTD) high at 1.0981. On the other hand, sellers need to push prices below the 200-DMA at 1.0838, so they could threaten to challenge 1.0800.

EUR/USD finds support in the low 1.0800s. Economists at Scotiabank analyze the pair’s outlook.

EUR may be trying to rebound from the low 1.0800s

• EUR/USD descends into mid 1.0800s ahead of Wednesday’s key Fed meeting. 
• Speculation is mounting that the Fed could alter how many interest rate cuts it expects to make in 2024. 
• ECB Vice-President De Guindos sees services inflation still too high for a rate cut.
   

EUR/USD declines by five hundredths of a percent into the mid 1.0800s on Tuesday, before the big event of the week in Forex, the Federal Reserve’s (Fed) March meeting policy announcement. 

Although the Fed is not expected to change its interest rates at the meeting, there is a chance it could change its accompanying statement and forecasts. This could alter the outlook for interest rates and therefore the US Dollar (USD) valuation. 

Interest rates, set by central banks, are a key driver for foreign exchange markets.  Higher interest rates tend to support a currency by attracting greater inflows of foreign capital with the opposite being the tendency for lower rates. 

EUR/USD weakens as investors monetary policy expectations change 

EUR/USD downside over recent days has mainly been driven by renewed US Dollar strength, on the back of a combination of rising expectations there will be a delay in the Fed cutting interest rates and that there may be fewer cuts overall in 2024. 

Speculation is mounting that the Federal Reserve will revise the forecasts in its accompanying notes to the meeting, the Summary of Economic Projections (SEP). In the previous SEP, Fed officials forecast three 25 basis points (0.25%) rate cuts in 2024 but some analysts now think there is a material risk that this could be revised down to two 25 bps cuts to reflect inflationary pressures remaining elevated. A revision down to two cuts could pressure EUR/USD lower. 

“The summary of economic projections will be updated and contains hawkish risks in our assessment with the committee potentially projecting fewer cuts in 2024,” says David Doyle, head of economics at Macquarie, in a note about the Fed meeting. 

The market continues to see June as the first month when the Fed is more likely than not to make its first interest rate cut, but over the last few days July has gained in popularity. Current market-based probabilities, based on the CME FedWatch Tool, favor one or more cuts by June with a 55.1% chance, and by July with a 73.7% probability. The June figure has been trending down. 

“Our view on FOMC policy remains that the first 25 bps cut will occur in July,” says Macquarie’s Doyle. “ In 2024 we anticipate 50 bps of cuts and a further 50 bps in 2025,” he adds.  

Services inflation too high says De Guindos

In Europe, a similar debate is going on about when to begin cutting interest rates. On Tuesday, Vice-President of the European Central Bank (ECB), Luis de Guindos, said “we have to wait,” because “services inflation” remains too high. 

De Guindos said he thought June was the right time to review cutting interest rates. His views fall in line with that of the ECB President Christine Lagarde and several other officials. 

Although a faction within the ECB led by Francois Villeroy de Galhau appeared to be pushing for a spring rate cut earlier in the month, they appear to be outnumbered by officials favoring June. 

The EUR/USD seemed to find some support on Monday after the Eurozone Trade Balance data showed a healthy surplus for the region, and final revisions for inflation data for February came out in line with flash estimates.  

Data out on Tuesday is unlikely to move the dial much. In Europe, German and Eurozone ZEW Survey results are scheduled for publication. In the US, Building Permits (a leading indicator) and Housing Starts will be released later in the day. 

Technical Analysis: EUR/USD falls below key level, now vulnerable to more declines

EUR/USD penetrates below the level of the 1.0867 swing lows on Tuesday, and by doing so probably reverses the direction of the short-term uptrend. Now the odds favor more losses. 

 Euro versus US Dollar: 4-hour chart

A new series of declining peaks and troughs has begun since the March 8 highs. Subject to fundamentals, the price will probably continue to fall to the next key support level at roughly 1.0800 – the lows of wave B of the Measured Move that unfolded in February and early March. 

The daily chart below is showing the Moving Average Convergence/ Divergence (MACD) momentum indicator crossing over the signal line, giving a bearish sell signal, and adding further evidence to a change of trend. 

However, it is also flagging up a few key barriers to progress lower in the form of dynamic support from the red 50-day and then the green 200-day Simple Moving Averages (SMA). 

Euro versus US Dollar: Daily chart

The 50-day SMA is situated at 1.0848 and the 200-day SMA at 1.0839 and both are likely to be tough support levels to crack. Whether bears can push through, may well depend on the outcome of the up-and-coming Fed meeting.

EUR/USD remains under bearish pressure. Economists at ING analyze the pair’s outlook.

EUR will likely ignore ZEW figures

• EUR/USD trades in negative territory near 1.0871 amid the cautious mood in Tuesday’s early European session. 
• The pair keeps the bearish vibe below the key EMA; RSI indicator lies below the 50-midline. 
• The first downside target is seen at 1.0852; the initial resistance level will emerge at 1.0882.

The EUR/USD pair trades on a negative note during the early European session on Tuesday. The major pair moves in a narrow range between 1.0866 and 1.0876 as traders prefer to wait on the sidelines ahead of the Federal Reserve's (Fed) interest rate decision on Wednesday. At the press time, EUR/USD is trading at 1.0871, down 0.01% on the day. 

Technically, EUR/USD maintains the bearish outlook unchanged as the major pair is below the key 50- and 100-period Exponential Moving Averages (EMA) on the four-hour chart. Furthermore, the downward momentum is further confirmed by the Relative Strength Index (RSI), which lies below the 50-midline, indicating that further downside looks favorable. 

The first downside target for the major pair is located near the lower limit of the Bollinger Band at 1.0852. Further south, the next contention level is seen at the 1.0800 mark, representing the confluence of a low of February 22 and a psychological mark. A breach of this level will expose a low of February 20 at 1.0761, and finally a low of February 15 at 1.0725.

On the other hand, the initial resistance level will emerge at the 100-period EMA at 1.0882. The critical upside barrier to watch for EUR/USD is the 1.0900-1.0905 region, portraying the 50-period EMA, psychological figure, and a high of March 18. A bullish breakout above the latter will see a rally to the upper boundary of the Bollinger Band at 1.0926, followed by a high of March 14 at 1.0955.

EUR/USD four-hour chart 

• EUR/USD remains on the defensive near 1.0872 amid renewed USD demand. 
• The Fed is anticipated to hold benchmark interest rates steady in the range of 5.25%–5.50% at its March meeting.
• ECB policymakers signaled progress in easing inflation and began discussions about the rate cut.
• The Federal Reserve's (Fed) monetary policy meeting will be a closely watched event. 

The EUR/USD pair edges lower to multi-day lows around 1.0870 on the firmer US Dollar (USD) during the early Asian session on Tuesday. The Federal Reserve (Fed) monetary policy meeting on Wednesday will be in the spotlight, with no change in rates expected. Meanwhile, the cautious mood in the market might lift the Greenback against the Euro (EUR). The major pair currently trades around 1.0872, unchanged for the day. 

The recent US economic data showed inflation in the US economy remains elevated, and this pushed out market expectations for the first rate cut in June. The Fed Chairman Jerome Powell said two weeks ago that the central bank is not far from the confidence it needs to cut rates, while some Fed officials expect the first rate cut could happen later this year or during the summer.

The Fed will announce its interest rate decision on Wednesday, which is anticipated to hold benchmark interest rates steady in the range of 5.25%–5.50% at its March meeting. Investors have priced in a nearly 73% chance that the Fed will cut rates in July, according to the CME FedWatch Tools.

The European Central Bank (ECB) decided to keep borrowing costs at a record high at its March meeting. Nonetheless, the central bank policymakers signaled progress in easing inflation and began discussions about the rate cut. The ECB Governing Council member, Pablo Hernandez de Kos, said that the central bank may start lowering interest rates in June if inflation in the eurozone continues to decline. Meanwhile, ECB policymaker Mario Centeno stated that cutting borrowing costs could help prevent a euro area recession. 

Additionally, ECB Governing Council member Klaas Knot penciled in June for a first-rate cut and expects three rate cuts this year, while ECB President Christine Lagarde said that June is the earliest it is likely to cut interest rates after the ECB lowered its forecasts for inflation and estimated it will reach its 2% target in 2025. 

Looking ahead, market players will keep an eye on the German and Eurozone ZEW Survey on Tuesday. Also, the US Building Permits and Housing Starts will be released later in the day. The attention will shift to the Fed interest rate decision and press conference on Wednesday. Traders will take cues from this event and find trading opportunities around the EUR/USD pair.  

• Euro dips as investor focus on upcoming FOMC meeting and interest rate projections.
• Eurozone inflation aligns with expectations, but EUR/USD's movement restrained by anticipation of Fed's policy direction.
• ECB's Centeno highlights the importance of price stability and suggests rate adjustments could prevent recession in the Eurozone.

The Euro drops against the US Dollar at the beginning of the week as investors brace for the Federal Open Market Committee (FOMC) monetary policy decision. Expectations that the ‘dot plots’ might adjust the Federal Reserve’s (Fed) projections of monetary policy put pressure on the EUR/USD, which trades at 1.0872, down 0.14%.

EUR/USD falls ahead of Fed’s decision

The current week will witness three major central bank monetary policy decisions. On Tuesday, the Bank of Japan is expected to raise rates by 10 basis points and end the era of negative interest rates. On Wednesday, the Fed is foreseen to keep policy unchanged, though speculations are mounting that the US central bank would likely adjust their projections on interest rates.

Eurozone (EU) inflation in February, as measured by the Harmonized Index of Consumer Prices (HICP), cooled from 3.3% to 3.1% YoY, as expected. The core HICP edged lower from 2.8% to 2.6% aligned with forecasts. The data barely moved the EUR/USD pair as traders braced for the Fed’s decision in two days.

In the meantime, European Central Bank (ECB) policymaker Mario Centeno said that price stability needs financial stability, adding that reducing the main rate may help avoid a recession in the bloc’s economy.

Across the pond, the US economic schedule revealed that the National Association of Home Builders (NAHB) Market Index improved the most since July 2023, rising by 51, up from 48 in February.

In the meantime, the fixed-income market shows that US bonds remain offered, as US Treasury bond yields push higher across the short and long ends of the curve. That is bolstering the Greenback, according to the US Dollar Index (DXY), which is up 0.17%, at 103.62.

EUR/USD Price Analysis: Technical outlook

The daily chart shows the EUR/USD has finally broken below last Friday’s low of 1.0872, extending its losses below the 1.0870 figure. Nevertheless, buyers could be leaning in the 100-day moving average (DMA) at 1.0860, which, once cleared, could open the door for further downside. The next key dynamic support levels are the 50-DMA at 1.0850 and the 200-DMA at 1.0838. The first key resistance level would be the 1.0900 mark.

EUR/USD is holding a tight range around the 1.0900 figure. Economists at Scotiabank analyze the pair’s outlook.

Trend signals are neutral

EUR/USD hovers slightly below 1.0900. Economists at ING analyze the pair’s outlook.

PMIs on Thursday could potentially offer some direction to EUR/USD into the weekend

• EUR/USD is under pressure amid fading expectations the Fed will cut interest rates early. 
• The dot plot from the Fed’s meeting on Wednesday could show a shift from three to two cuts this year, Bloomberg reports. 
• Such a change would probably cause more negativity for EUR/USD.
   

EUR/USD has taken a step lower and is now trading within a new range in the 1.0800s following last week’s warmer-than-expected US inflation data, which increased the probability the Federal Reserve (Fed) will need to keep interest rates higher for longer. 

Since higher interest rates attract more foreign capital inflows, this was positive for the US Dollar (USD), but negative for EUR/USD, which measures one Euro’s (EUR) buying power in USD terms. 

EUR/USD traders prepare for Fed meeting on Wednesday

EUR/USD is likely to see heightened volatility on Wednesday when the Fed concludes its March meeting, announces its policy decision and publishes its Summary of Economic Projections (SEP). It is highly unlikely the Fed will announce a rate cut at the meeting, even though that was a possibility a few weeks ago. 

“The reality is justly sinking in that the Fed is going to take its time,” says Mark Cranfield, an analyst at Bloomberg MLIV.

His view is backed up by the CME FedWatch Tool, which calculates the market-based probabilities of the Fed making rate cuts. At the time of publication it is calculating a 58% chance the Fed will make one or more 0.25% cuts by June, and 76.5% by July. This has fallen from the 80% for June registered by the tool at the beginning of the month. 

In the last SEP, the board of governors of the Fed predicted at least three 0.25% interest rate cuts in 2024 in their “dot plot”, however, Bloomberg News says there is now a material possibility that this will be reduced to only two cuts after the March meeting. Such a retrenchment would be viewed as “quite aggressive,” according to Cranfield. As such it would be likely to lead to further weakness for EUR/USD. 

“A pleasant surprise would be if the Fed were to maintain three dot-plot cuts,” added Cranfield, who suggests such a maintenance of the status quo would be bearish for USD (bullish for EUR/USD). 

July the new June

A report published by Bloomberg on Monday shows that after digesting over 900 headlines quoting Fed officials since the beginning of the year, the conclusion is that July actually comes out as more likely as the month when the Fed begins easing, rather than June. 

If this is so, market expectations will need to shift further away from June, with negative consequences for EUR/USD, all other things being equal. 

There is little major data out for the Eurozone on Monday. February Consumer Price Index data is a revision of an estimate and unlikely to deviate from the 2.6% preliminary result for headline and 3.1% for Core. 

Technical Analysis: EUR/USD hovers above abyss

EUR/USD finds a temporary support as it extends its correction from the 1.0981 March 8 high. 

The depth of the correction brings into question the sustainability of the hitherto dominant short-term uptrend. 

Euro vs US Dollar: 4-hour chart

Price is still above the pivotal 1.0867 level of the previous key swing low. This is likely to be a make-or-break level for the trend. Should prices cross below it would shift the balance of probabilities in favor of a reversal of the uptrend. 

Such a breakdown would then most probably extend to 1.0795, at the low of the B leg of the prior ABC Measured Move pattern that unfolded higher during February and early March. 

Alternatively, if the level holds, the short-term uptrend remains intact and likely to resume. Confirmation of a higher high and an extension of the uptrend would come from a break above the 1.0981 highs. 

After that, tough resistance is expected at the 1.1000 psychological level – a likely bloody battlefield for bulls and bears. 

A decisive break above 1.1000, however, would open the gates to further gains towards the key resistance level at 1.1139, the December 2023 high. 

A “decisive” break is one characterized by a long green candle piercing clearly above the level and closing near its high, or three green bars in a row, breaching cleanly above the level.