EUR/USD tests 200-day average with key Central bank speakers waiting in the wings

• EUR/USD is testing the key 200-day SMA on Friday after recapitulating over the prior sessions. 
• The pair is poised to break below key support levels as key central bank figures line up to speak. 
• Their commentary could impact expectations of when future interest rate cuts may take place.

EUR/USD is trading a quarter of a percent down on Friday, in the lower 1.0800s just below the 200-day Simple Moving Average (SMA). The pair has seen increased volatility since the Federal Reserve (Fed) policy meeting on Wednesday. The release of Eurozone and US flash PMI data for March on Thursday caused further volatility after the data showed the US economy in better shape than that of the euro area. 

As traders wrap up for the weekend there is a heightened possibility of further moves as a roll call of central bank speakers take to the pulpit to share their views on Friday – from both the European Central Bank (ECB) and the Fed. 

EUR/USD: A day of doves and hawks

EUR/USD exchanges hands in the 1.0830s as the European session on Friday gets underway. Key drivers for the pair at the end of the week will probably be commentary from central bankers. Several key figures are set to speak on monetary policy topics, including Bundesbank’s President Joachim Nagel, Fed’s Chairman Jerome Powell and ECB chief economist Philip Lane. 

Their comments could impact the outlook for interest rates, which are set by central banks. Interest rates impact currencies because they dictate the level of foreign capital inflows from investors searching for returns. When interest rates are expected to go up it is positive for a currency; when down negative. Currently, the debate hinges around the timing of future rate cuts, with the consensus being that both the ECB and the Fed will make cuts in June. Anything that deviates from that view could cause volatility.  

The first key central banker in the line up is the President of the Bundesbank, Joachim Nagel at 9:00 GMT who will be participating “in a webcast on monetary policy challenges and the economic outlook for the Eurozone and Germany,” according to the economic calendar. 

His most recent comments suggested he is concerned about “Europe’s growth prospects more than his homeland” and back in February, he said the governing council should wait for Q2 wage data before deciding on whether to cut interest rates or not, suggesting he foresees June as a potential date for a rate-hike. 

At 13:00 GMT, Federal Reserve Chairman Jerome Powell will participate in a “Fed Listens” panel about current economic conditions and how Covid impacted the economy. Vice-Chair Philip Jeffereson and Governor Michelle Bowman will also be at the event. 

At 16:00 GMT, Federal Reserve Vice-Chair for Supervision Michael Barr will participate in a virtual discussion titled "International Economic and Monetary Design".

At 17:00 GMT , ECB Chief Economist and Board Member Philip Lane will deliver a policy lecture on inflation and monetary policy at the Aix-Marseille School of Economics (AMSE). 

At 20:00 GMT, Federal Reserve Bank of Atlanta President Raphael Bostic will moderate a conversation about household finances at the 2024 Household Finance Conference – there is an outside chance he could mention interest rates. 

Technical Analysis: EUR/USD tests trendline and 200-day SMA

EUR/USD is making volatile switches inside the 1.0800s and 1.0900s. It is currently trading back down in the 1.0800s just below the 200-day SMA at 1.0839, and a major trendline. 

Euro versus US Dollar: Daily chart

The pair appears to be threatening to break below the trendline which could usher in a more bearish phase. 

Such a move would be likely to tumble to at least 1.0775, the 0.618 Fibonacci extension of the move prior to the breakout lower, a common method of forecasting targets for trendline breaks. 

The move down lacks momentum, however, as evidenced by the Relative Strength Index (RSI) on the 4-hour chart below, which shows RSI failing to reflect price’s current move down to a lower low – a suggestion bearish conviction is lacking. 

Euro versus US Dollar: 4-hour chart

Whilst the lack of momentum does not completely preclude the expectation price will fall further, it brings in a note of caution and suggests bears should be careful not to be caught in what could potentially be a false break.