CFD Trading Rate Euro vs US Dollar (EURUSD)

• 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

• EUR/USD is selling off after the release of more positive data from the US.
• The data suggests the Federal Reserve could delay cutting interest rates, supporting USD. 
• The ECB continues to target June as the first month to cut interest rates. 

EUR/USD falls to the lower 1.0700s on Tuesday after more strong US macroeconomic data supports the US Dollar (USD), pushing down the probability of the US Federal Reserve (Fed) cutting interest rates by June to close to 50%. The maintenance of higher interest rates is good for the USD as it attracts more capital inflows. 

In Europe, slower growth and lower inflation mean rate-setters at the European Central Bank (ECB) are not as cautious about cutting interest rates to help stimulate the wheels of growth. This divergence of trajectories between both central banks is negative for EUR/USD. 

EUR/USD declines as US data bears up

EUR/USD takes another step lower, breaching the key 1.0800 level over the Easter weekend, as some firm US data suggests the Fed will have to delay reducing interest rates as inflation is likely to remain stubbornly above target. 

On Good Friday, the inflation metric favored by the Fed, the core Personal Consumption Expenditures Price Index (PCE) in February, came out at 2.8%, exactly as expected, if below the 2.9% of January. It showed price pressures remain buoyant and well above the Fed’s 2.0% target. 

US Manufacturing data on Easter Monday was also overall quite positive, with the ISM Manufacturing PMI for March vaulting over 50 – the dividing line between expansion and contraction – from a previous level of 47.8. The result was well above expectations of a rise to 48.4. It was the first result denoting expansion in the US manufacturing sector since November 2022. 

The Euro was kept under pressure, meanwhile, by another ECB rate setter joining the chorus line for a June rate cut. ECB Governing Council member and Austrian Central Bank Governor Robert Holzmann said that the ECB could cut interest rates before the Fed, and in regards to when, “will depend largely on what wage and price developments look like by June.”

Technical Analysis: EUR/USD continues pushing lower

EUR/USD extends the dominant short-term downtrend that started at the March 8 high. It is currently on its way down to key support at the 1.0694 year-to-date (YTD) lows. 

Euro versus US Dollar: 4-hour chart

The pair is oversold according to the Relative Strength Index (RSI) momentum indicator. This is a signal for sellers not to add any more shorts to their positions. If the indicator rises out of oversold (above 30), it will be a signal to close all short positions and open longs. This could lead to a pullback, although the precedence of the downtrend suggests an eventual capitulation. 

The 1.0694 February and YTD lows are likely to present substantial support and a bounce off that level is 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 is heavy around 1.0730. Economists at Société Générale analyze the pair’s outlook.

Next support is 1.0710/1.0695

EUR/USD is comfortably trading under 1.0800. Economists at ING analyze the pair’s outlook.

Can't argue with wider rate differentials

• EUR/USD faces some sell-off around 1.0730 in Tuesday’s early European session. 
• The major pair holds below the key EMA with an oversold RSI condition.
• The first downside target is located at 1.0720; the 1.0800–1.0805 region acts as an immediate resistance level. 

The EUR/USD pair extends its downside to 1.0730, the weekly low during the early European session on Tuesday. The upbeat US ISM Manufacturing PMI for March lifts the US Dollar (USD) and drags the EUR/USD pair lower. Investors will take more cues from Fedspeak later on Tuesday, including Michelle Bowman, Loretta Mester, John Williams, and Mary Daly. 

Technically, EUR/USD maintains the bearish outlook unchanged as the major pair is below the 50- and 100-period Exponential Moving Average (EMA) on the four-hour chart, which means the path of least resistance level is to the downside. It’s worth noting that the Relative Strength Index (RSI) holds in bearish territory around 28. However, the oversold RSI condition indicates that further consolidation cannot be ruled out before positioning for any near-term EUR/USD depreciation.

The key contention level will emerge near the confluence of the lower limit of the Bollinger Band and a low of February 13 at 1.0720. Any follow-through selling below the latter will see a drop to a low of November 9, 2023, at 1.0660, followed by a low of November 2, 2023, at 1.0565. 

On the upside, the 50-period EMA and a high of March 29 at the 1.0800-1.0805 zone act as an immediate resistance level for EUR/USD. The additional upside filter to watch is the 100-period EMA at 1.0822. The next hurdle is seen near a high of March 26 at 1.0864. 

EUR/USD four-hour chart

• EUR/USD trades on a weaker note for the fourth consecutive day near 1.0730 on Tuesday. 
• The US Manufacturing PMI climbed to 50.3 in March against 47.8 in the previous reading, better than expected. 
• ECB’s Stournaras said it could cut rates by a total of 100 basis points this year. 

The EUR/USD pair remains under selling pressure, reaching nearly weekly lows of 1.0730 on Tuesday during the early Asian trading hours. The uptick of the US Dollar Index (DXY) above the 105.00 mark and higher US Treasury bond yields weigh on the major pair. Many Federal Reserve (Fed) officials, including Michelle Bowman, Loretta Mester, John Williams, and Mary Daly are set to speak later on Tuesday. 

The US manufacturing activity in March has entered an expansion phase for the first time in nearly 18 months with increased production and new orders, according to the Institute for Supply Management (ISM) on Monday. The Manufacturing PMI climbed to 50.3 in March from 47.8 in the previous reading, above the market consensus of 48.4. The US Dollar gains traction following the upbeat US Manufacturing PMI. Investors have priced in nearly 61% odds of the Fed cutting rates by 25 basis points (bps) in June, up from 55.2 before the data release, according to the CME FedWatch Tool.

Across the pond, the European Central Bank (ECB) Governing Council member Robert Holzmann said on Saturday that the central bank could lower its key interest rate before the US Fed. Additionally, the ECB policymaker Yannis Stournaras stated that the ECB could possibly cut rates by a total of 100 basis points this year, but there is still no consensus on that. Stournaras said last week that the central had no reason to wait for the Fed to cut rates first. The dovish comments from the ECB policymakers exert some selling pressure on the Euro (EUR) and act as a headwind for the EUR/USD pair. 

Market players will watch the HCOB manufacturing PMI for Spain, Italy, France, Germany, and the Eurozone. The preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for March will be closely watched by traders on Wednesday. On Friday, attention will shift to US Nonfarm Payrolls. 

• EUR/USD declines following upbeat US Manufacturing PMI and Prices Paid Index, hinting the Fed might refrain from easing policy.
• The rise in the US Dollar Index and Treasury yields reflects growing confidence in the US economic outlook.
• Upcoming Eurozone manufacturing PMIs could push the EUR/USD further down, with estimates expected to contract further.

The Euro extends its losses against the US Dollar, with most European markets being closed in observance of Easter Monday. Data from the United States sponsored a leg down in the EUR/USD, which tumbled more than 0.40% and traded at 1.0742.

Strong US ISM Manufacturing PMI and a jump in prices paid, to keep Fed on hold

The Institute for Supply Management (ISM) revealed that business activity in March expanded for the first time since September 2022, an indication that the economy remains solid. The Manufacturing PMI came at 50.3, exceeding estimates of 48.4 and smashing February’s 47.8 reading. The same report revealed that the Prices Paid Index expanded to 55.8, its highest level since August 2022, when it hit 52.5. This could deter the Federal Reserve from easing policy, as the economy fares better than expected.

At around 13:45 GMT, S&P Global revealed the latest revision of March’s Manufacturing PMI for the United States, coming at 51.9, below the previous reading of 52.2.

Following the data, the EUR/USD has extended its losses past the psychological 1.0750 figure, which could exacerbate a test of the February 14 swing low of 1.0694.

In the meantime, the US Dollar Index (DXY), which measures the buck’s performance against a basket of peers rally 0.36%, is up at 105.93, while US Treasury yields rise. The 10-year benchmark note rate is at 4.305%, up almost ten basis points.

Following the data release, money market traders see a 61% chance of the Fed cutting rates by 25 basis points, as depicted via the CME FedWatch Tool.

Across the pond, the Eurozone (EU) economic docket will feature the release of the HCOB manufacturing PMI for Spain, Italy, France, Germany, and the whole bloc. Most readings, except for Spain, are expected to deteriorate further and remain in recessionary territory.

EUR/USD Price Analysis: Technical outlook

The EUR/USD daily chart portrays the pair as aiming toward the 1.0700 figure, ahead of challenging 1.0694, February’s 14 low. A breach of the latter will expose the November 10 low intermediate support level at 1.0656, followed by major support at 1.0516, the November 1 swing low. On the other hand, if buyers reclaim 1.0750, look for an upside correction toward 1.0800.

• EUR/USD drops after a short-lived pullback from 1.0800 ahead of a data-packed US economic calendar.
• The USD Index rises as market sentiment turns downbeat ahead of the US opening after an extended weekend.
• Eurozone preliminary inflation data will guide market expectations for the ECB rate cuts in June.

The EUR/USD pair falls after a pullback move to near the round-level resistance of 1.0800 in the late London session. The major currency pair faces pressure as investors turn cautious ahead of a data-packed week.

The market sentiment appears to be risk-off as risk-sensitive currencies are down. S&P 500 futures have surrendered almost entire gains posted in the European session ahead of opening after a long weekend fur to Good Friday. The US Dollar Index (DXY) advances to 104.65 amid uncertainty ahead of the crucial United States Nonfarm Payrolls (NFP) report for March, scheduled for Friday.

Before the US NFP, investors will focus on the US Manufacturing PMI report for March, which will be published at 14:00 GMT. The factory data is estimated to have increased to 48.4 from 47.8 in February, but will remain below the 50.0 threshold.

The US Dollar rises even though market expectations for the Federal Reserve (Fed) pivoting to rate cuts from the June policy meeting have increased. According to the CME FedWatch tool, traders are pricing in a 65% chance that the Fed will trim interest rates in June.

The likelihood of a rate cut has increased after US core Personal Consumption Expenditure Inflation (PCE) data for February softened as expected. The monthly and annual core PCE inflation grew by 0.3% and 2.8%, respectively. Also, Fed Chair Jerome Powell said after the release of the US core PCE report that the latest US inflation data was "along the lines of what we would like to see.”

On the Eurozone front, investors await the preliminary inflation data for March, which will be released on Wednesday. The annual core inflation is expected to have decelerated to 3.0% from 3.1% in February. The annual Harmonized Index of Consumer Prices (HICP) is forecasted to have risen at a steady pace of 2.6%. Easing price pressures would accelerate investors’ prospects for the European Central Bank (ECB), kickstarting the rate-cut cycle from the June meeting.

• EUR/USD holds its position after trimming daily gains on Monday.
• Technical analysis suggests a possible confirmation of bearish momentum for the pair.
• A break above the 1.0800 level could lead the pair to test a 23.6% Fibonacci retracement level of 1.0818 and the nine-day EMA at 1.0820.

EUR/USD pares intraday gains, trading higher around 1.0780 during the Asian session on Monday. The pair could find the key resistance at the psychological mark of 1.0800.

A breakthrough above this barrier could lead the EUR/USD pair to explore the region around the 23.6% Fibonacci retracement level of 1.0818 and the nine-day Exponential Moving Average (EMA) at 1.0820. 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 navigate the area around the psychological level of 1.0700.

EUR/USD: Daily Chart

• EUR/USD trades in negative territory around 1.0787 on the firmer USD. 
• The US Core PCE was up 0.3% MoM and 2.8% YoY, matching the market estimation. 
• ECB’s Stournaras said that a total of four interest rate cuts are possible in 2024. 

The EUR/USD pair trades on a weaker note near 1.0787 on the renewed US dollar (USD) demand during the early Asian session on Monday. The higher-for-longer stance from the Federal Reserve (Fed) provides some support to the Greenback and weighs on the EUR/USD pair. Meanwhile, the US Dollar Index (DXY) currently trades around 104.52, gaining 0.03% on the day. 

The Commerce Department's Bureau of Economic Analysis revealed on Friday that the US Personal Consumption Expenditures (PCE) Price Index rose 0.3% MoM in February, in line with expectations. On an annual basis, February PCE inflation advanced 2.5% YoY in February. The Core PCE, excluding the volatile food and energy components, rose 0.3% MoM and 2.8% YoY in February. The data revealed an ongoing trend of inflation, which might put the Federal Reserve (Fed) on hold until it can begin cutting interest rates this year.

The US Fed left interest rates unchanged in a range between 5.25% and 5.5% for the fifth consecutive time last week, and it still expects three quarter-percentage point cuts by the end of the year. According to the CME FedWatch Tool, traders are currently pricing in around 55% odds of a first Fed rate cut in June, down from nearly 70% last week. On Friday, Fed Chairman Jerome Powell said that recent US inflation data was in line with expectations and that the Fed's goal for the interest rate this year remained unchanged.

On the other hand, European Central Bank (ECB) Governing Council member Yannis Stournaras said on Sunday that a total of four interest rate cuts is possible in 2024, with a total rate reduction of 100 basis points (bps) by year-end. Meanwhile, ECB policymaker Robert Holzmann stated that Europe could cut interest rates before the US. Holzmann added that interest rate cuts are likely to come, but it will depend on what wage and price developments look like by June. Market players will monitor the US ISM Manufacturing PMI on Monday, which is forecast to rise to 48.4 in March from 47.8 in the previous reading. On Tuesday, the German Consumer Price Index (CPI) will be released. 

• EUR/USD nudges up slightly to 1.0788 after Core PCE inflation data for February aligns with market forecasts.
• Headline PCE inflation for February shows a modest increase, maintaining market anticipation for the Federal Reserve's next moves.
• Upcoming speeches by Fed Chair Jerome Powell and Mary Daly are eyed by EUR/USD traders.

The EUR/USD remains barely unchanged on thin trading after the US Bureau of Economic Analysis (BEA) revealed the Federal Reserve’s preferred gauge for inflation, the Core Personal Consumption Expenditure (PCE) price index for February was aligned with estimates. That said, the EUR/USD trades at 1.0788, posting minuscule gains of 0.02%

EUR/USD posts minimal movement after US inflation data

The BEA revealed that Core PCE came at 0.3% MoM and at 2.8% YoY, with both figures aligned with the market consensus. Headline PCE figures rose by 0.3% MoM lower than expected and January’s data. In the 12 months to February, PCE came at 2.5%, as foreseen, but a tenth higher than the prior month’s data.

Other data showed that Wholesale Inventories Advanced for February came at 0.5% MoM up from -0.2% in the previous month.

Thin liquidity conditions witnessed the EUR/USD push below 1.0780 before breaking above 1.0790. Buyers are eyeing a clear break above 1.0800, though they will face some intraday resistance, as depicted by the hourly chart, with the 50-Simple Moving Average (SMA) standing at 1.0800.

In addition, traders will watch San Francisco’s Fed President Mary Daly's speech at 15:20 GMT, followed by Fed Chair Jerome Powell's speech at 15:30 GMT.

According to BBH analysts, Fed Chair Jerome Powell's speech will be important. They noted, “Other Fed speakers have tilted hawkish after last week’s FOMC meeting, and markets will be watching to see if Powell follows suit or maintains the dovish tone from his press conference. With Powell, it’s always a coin toss but as we’ve said countless times before, the data will ultimately decide the timing of the first cut. As things stand, odds of a cut June 12 have fallen to 66% after rising to 85% post-FOMC.”

EUR/USD Price Analysis: Technical outlook

During the European session, the pair printed a low of 1.0767. However, the EUR/USD climbed above 1.0790 following the data release, with traders eyeing 1.0800. A decisive break will expose the March 28 high of 1.0827, followed by the 50-day moving average (DMA) at 1.0834, ahead of 1.0835, the 200-DMA. Once those levels are cleared, up next would be the 100-DMA at 1.0876. On the other hand, further losses are eyed below 1.0750, which would expose the February 14 low of 1.0694.

• EUR/USD continues to lose ground on dovish remarks from ECB members.
• German Retail Sales MoM and YoY declined by 1.9% and 2.7%, respectively, in February.
• Investors await the US PCE figures to gain further insight into the Fed’s interest rates trajectory.

EUR/USD maintains its position around 1.0770 during the European session on Friday, extending losses for the fourth consecutive day. However, trading volumes are light as market participants are likely observing Good Friday. The Euro faces downward pressure as European Central Bank (ECB) officials are increasingly suggesting a probable interest rate cut in June.

Additionally, the Euro faced downward pressure following weaker-than-expected Retail Sales data from Germany. The monthly report revealed a 1.9% decline in the sales of the German retail sector in February, contrary to expectations of a 0.3% increase following a previous decline of 0.4%. Additionally, year-over-year Retail Sales fell by 2.7%, surpassing the anticipated decline of 0.8% and the previous decrease of 1.4%.

Yannis Stoumaras stated on Tuesday that there is a growing consensus within the ECB for a rate reduction in June. ECB policymaker Francois Villeroy observed a rapid decrease in core inflation, although it remains elevated. He indicated that achieving the ECB's inflation target of 2% is feasible, but cautioned against growing downside risks if the ECB opts not to reduce rates. Additionally, ECB executive board member Fabio Panetta emphasized that restrictive policies are dampening demand and causing a rapid decline in inflation.

The US Dollar Index (DXY) strengthens, nearing 104.60, as recent data indicates annualized economic expansion in the United States (US), driven by consumer spending. In the fourth quarter of 2023, US Gross Domestic Product (GDP) Annualized expanded by 3.4%, surpassing market expectations of remaining unchanged at a 3.2% increase. US Core Personal Consumption Expenditures (QoQ) for the same period came in at 2.0%, slightly below the expected and previous reading of 2.1%.

The hawkish statements from a Federal Reserve (Fed) official, reinforced the Greenback. Fed Governor Christopher Waller's comments on Wednesday hinted at a potential delay in interest rate cuts, given the strong inflation figures. Investors now await the US Personal Consumption Expenditures (PCE) report on Friday, which serves as the Fed’s preferred inflation gauge, to gain additional insight and guidance.

• EUR/USD depreciates on hawkish sentiment surrounding the US Fed.
• Fed’s Waller hinted at a delay in interest rate cuts due to stronger inflation figures.
• ECB’s Villeroy suggested that the ECB's inflation goal of 2% is attainable.

EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar (USD) influenced by the hawkish market sentiment surrounding the Federal Reserve (Fed) and expectations of prolonged higher interest rates. This shift in sentiment is supported by recent strong economic indicators from the United States (US). The EUR/USD pair edges lower to near 1.0780 during the Asian trading hours on Friday.

The US Dollar Index (DXY) strengthens, nearing 104.60, driven by hawkish statements from a Federal Reserve (Fed) official, which boosted the Greenback. Fed Governor Christopher Waller's comments on Wednesday hinted at a potential delay in interest rate cuts, given the strong inflation figures. Investors now await the US Personal Consumption Expenditures (PCE) report on Friday, which serves as the Fed’s preferred inflation gauge, to gain additional insight and guidance.

In the fourth quarter of 2023, the US Gross Domestic Product (GDP) Annualized expanded by 3.4%, surpassing market expectations of remaining unchanged at a 3.2% increase. The US Gross Domestic Product Price Index remained steady with a 1.7% increase, in line with expectations for Q4.

US Core Personal Consumption Expenditures (QoQ) for the same period came in at 2.0%, slightly below both the expected and previous reading of 2.1%. Additionally, US Initial Jobless Claims decreased to 210,000 in the week ending March 22, contrary to expectations for an increase to 215,000 from the previous 212,000.

The Euro encounters difficulties following dovish remarks from European Central Bank (ECB) policymaker Francois Villeroy. Villeroy noted a rapid decline in core inflation, albeit it remains high. He suggested that the ECB's inflation goal of 2% is attainable, but warned of increasing downside risks if the ECB refrains from cutting rates.

Furthermore, ECB executive board member Fabio Panetta stated on Thursday that "the conditions to start easing monetary policy are materializing." He highlighted that restrictive policies are suppressing demand and leading to a swift drop in inflation. Panetta also indicated that risks to price stability have lessened.

• EUR/USD faces downward pressure after ECB’s Villeroy highlights the necessity of rate cuts to achieve inflation targets.
• Strong US economic performance, highlighted by revised GDP growth and sustained labor market tightness, supports the Dollar.
• Market anticipation grows for the upcoming US Core PCE price index, with potential implications for Fed's monetary policy.

The Euro extends its losses against the US Dollar, with the major diving below the 1.0800 figure, following dovish comments by European Central Bank (ECB) policymaker Francois Villeroy. The EUR/USD trades at 1.0787, down 0.37%.

EUR/USD fails pressured by ECB’s rate cut hints

ECB’s Villeroy comments increased EUR/USD sellers’ momentum late in the North American session. He said that core inflation decline is rapid but still high. He added that the 2% ECB inflation goal is within reach, while he saw increasing downside risks if the ECB didn’t cut rates. On the data front in the Eurozone, German Retail Sales plunged below estimates.

Recent data from the United States (US) showed the economy remains resilient after the Gross Domestic Product (GDP) for Q4 2023 was revised from 3.2% to 3.4%. Other data showed that the number of Americans filing for unemployment benefits was below estimates, and the previous week’s data, for the fourth consecutive week, an indication of the tightness of the labor market.

Further data revealed that the University of Michigan Consumer Sentiment hit its highest level since 2021, coming at 79.4, above the preliminary estimate of 76.5. Meanwhile, Pending Home Sales were up 1.6% Month over Month in February, beating expectations.

Given the backdrop, along with hawkish comments by Federal Reserve Governor Christopher Waller, were the drivers behind US Dollar bulls, which stepped in ahead of the release of the US Core Personal Consumption Expenditures (PCE) price index data.

EUR/USD Price Analysis: Technical outlook

After diving below the 200-day moving average (DMA), the EUR/USD has resumed to the downside, breaching below the February 29 cycle low of 1.0794 and sliding towards the 1.0780 area. If the pairs post a daily close below 1.0800, that will exacerbate the challenge of the February 14 low of 1.0694, ahead of 1.0600.

In another scenario, if EUR/USD buyers lift the pair above 1.0800, that could pave the way to test the 200-DMA at 1.0835.

EUR/USD is edging off its intraday low open but remains below 1.0800. Economists at Scotiabank analyze the pair’s outlook.

Resistance is seen at 1.0845/1.0855

• EUR/USD takes another step lower on poor German Retail Sales data. 
• Subdued consumer spending levels in Germany increase the probability the ECB will cut interest rates soon. 
• This contrasts with the US, where Fed officials are advocating a delay in rate cuts. 

EUR/USD edges down on Thursday, retesting key support at 1.0800, after the release of subpar German Retail Sales data raised further concerns over the health of Europe’s largest economy, weighing on the Euro (EUR). 

EUR/USD downtrend continues on fears Fed could delay cuts

EUR/USD’s move down extends the short-term downtrend that started after the rollover from the March 8 highs in the 1.0980s. The main catalyst appears to be the diverging commentary from rate-setters at the US Federal Reserve (Fed) and European Central Bank (ECB). 

Whilst at the beginning of March the ECB was signaling it would cut interest rates by June and the Fed potentially by as early as May, recent higher-than-expected US data and sticky inflation has led many Fed officials to question whether it may be too early to start cutting interest rates. 

The view the Fed may keep interest rates higher for longer has supported the US Dollar (USD) because higher interest rates tend to attract more foreign capital inflows. This is bearish for EUR/USD, which measures the buying power of a single Euro in USD terms. 

On Wednesday, Federal Reserve board member Christopher Waller added his voice to those advocating a delay, saying that “there is no rush to cut the policy rate,” in a speech to the Economic Club of New York, according to Reuters. 

ECB officials, on the other hand, have cleaved increasingly to June. Eurozone economic data has been on the whole disappointing compared to US data, although persistently high wage inflation still concerns some policymakers. 

EUR/USD took another step lower on Thursday after German Retail Sales in February showed shoppers on the whole tightening their purse strings. Weakening consumer spending is another sign inflation will come down further, prompting the ECB to cut interest rates. 

Retail Sales fell 2.7% YoY in Germany, which was far below estimates of a 0.8% decline, according to data from Statistisches Bundesamt Deutschland. Month-on-month the 1.9% decrease must have come as a shock after economists predicted a 0.3% rise.

Friday’s US core Personal Consumption Expenditures (PCE) Price Index data for February – the Fed’s preferred gauge of inflation – is likely to be an even more important release for EUR/USD. 

A higher-than-expected result could push even further back the time when the Fed is expected to cut interest rates, with negative consequences for the pair. 

Technical Analysis: EUR/USD continues pushing lower

EUR/USD extends the dominant short-term downtrend that started at the March 8 high. It is currently retesting key support at around 1.0800. 

Euro versus US Dollar: 4-hour chart

The pair formed a three wave price pattern called a Measured Move back in February and early March and the low of wave B is underpinning key support at just above 1.0800. 

If the downtrend continues and breaks decisively below the B-wave lows at roughly 1.0795 it would signal a continuation of the downtrend even lower, to the next target at 1.0750, followed by the February lows at roughly 1.0700. 

A decisive break is one characterized by a long red bearish candle that breaks cleanly through the level and closes near its low, or three down candles in a row that breach the level. 

Alternatively, a move above the 1.0950 level would bring into question the validity of the short-term downtrend.