EUR/USD remains capped near 100-day SMA amid emergence of USD dip-buying

• EUR/USD touches a fresh weekly high on Thursday, albeit lacks follow-through buying.
• Hawkish Fed expectations revive the USD demand and act as a headwind for the major.
• ECB rate cut bets further undermine the Euro and support prospects for deeper losses.

The EUR/USD pair struggles to capitalize on its modest intraday gains back closer to the 1.0800 mark, a fresh weekly high, and turns neutral during the first half of the European session on Thursday. Despite the recent hawkish comments by the European Central Bank (ECB) officials, expectations for an interest rate cut at the start of the second quarter have been growing stronger. This, in turn, undermines the Shared Currency, which, along with the emergence of some US Dollar (USD) dip-buying, acts as a headwind for the currency pair.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, for now, seems to have stalled its retracement slide from the highest level since November 14 touched earlier this week amid the Federal Reserve's (Fed) less dovish outlook. Adding to this, a slew of influential FOMC members recently and the incoming robust US economic data smashed expectations for early interest rate cuts. This remains supportive of elevated US Treasury bond yields, which help revive the USD demand and cap gains for the EUR/USD pair.

The markets, however, are still pricing in five rate cuts over the course of the seven remaining FOMC policy meetings this year. This might hold back the USD bulls from placing aggressive bets and help limit the downside for the EUR/USD pair. Traders now look to the release of the US Weekly Initial Jobless Claims data, which, along with scheduled speeches by Richmond Fed President Thomas Barkin, might provide some impetus. The market focus, meanwhile, remains glued to the latest US consumer inflation figures, due next week.

Daily Digest Market Movers: Bulls seem reluctant as reduced Fed rate cut bets revive USD demand

• The EUR/USD pair stalls its recovery move from almost a three-month low touched earlier this week amid the emergence of some US Dollar dip-buying on Thursday.
• The US bond yields remain elevated amid reduced bets for early and steep interest rate cuts by the Federal Reserve in 2024 and help revive demand for the Greenback.
• Several FOMC members, including Fed Chair Jerome Powell, don’t see an urgent case for lowering borrowing costs, suggesting that a rate cut isn’t likely until the May meeting.
• Powell smashed any remaining hopes for a March rate cut and said on Sunday that the central bank can be prudent in deciding when to start easing on the back of a strong economy.
• Federal Reserve Board Member Adriana Kugler said on Wednesday that she is optimistic that inflation progress will continue, but stopped short of offering a timeline of the rate-easing cycle.
• Boston Fed President Susan Collins noted that inflation has slowed faster than expected but added that the central bank wants more certainty before it starts cutting rates.
• Minneapolis Fed President Neel Kashkari said that officials would like to see a few more months of inflation data and added that two to three cuts will be appropriate for 2024.
• Richmond Fed President Tom Barkin said that it is a good idea for the central bank to take its time with rate cuts given the uncertainty about where the US economy is headed.
• The markets, however, are still pricing in five rate cuts over the course of the seven remaining FOMC meetings this year, which might cap any further gains for the US Dollar.
• As inflation in the Eurozone moves closer to 2%, the first European Central Bank interest rate cut is expected to occur earlier than expected, possibly in the next quarter.
• Thursday's US economic docket features the release of the usual Weekly Initial Jobless Claims, which, along with Fedspeak, will influence the USD and provide a fresh impetus.

Technical Analysis: Needs to break through descending trend-line hurdle for bulls to seize control

From a technical perspective, the EUR/USD pair continues with its struggle to make it through the 100-day Simple Moving Average (SMA). Adding to this, the intraday pullback from the vicinity of the 1.0800 mark suggests that the recent downtrend from the December monthly swing high is still far from being over. That said, it will still be prudent to wait for some follow-through selling before positioning for any further decline.

In the meantime, the 1.0745-1.0740 area is likely to protect the immediate downside ahead of the 1.0725-1.0720 region, or the multi-month low, and the 1.0700 mark. A convincing break below the latter will be seen as a fresh trigger for bearish traders and make the EUR/USD pair vulnerable to accelerate the slide further towards the 1.0665-1.0660 support. Spot prices could eventually drop to the 1.0620-1.0615 region and the 1.0600 round figure.

On the flip side, momentum beyond the 1.0800 mark is likely to meet with a fresh supply near the very important 200-day SMA, currently pegged near the 1.0830-1.0835 region. This is closely followed by a one-month-old descending trend line, around mid-1.0800s. A sustained strength beyond the latter might shift the near-term bias in favor of bulls and prompt aggressive short-covering around the EUR/USD pair, allowing it to reclaim the 1.0900 mark.