EUR/USD finds six-week low near 1.0800 as Euro broadly underperforms

• EUR/USD backslides as ECB headlines stoke ECB rate cut bets.
• Europe sees GDP figures on Wednesday ahead of US Fed rate call.
• Markets bet on ECB rate cut in April.

EUR/USD fell to its lowest bids since mid-December, testing the 1.0800 handle after European Central Bank (ECB) officials left the doors wide open for rate cuts much earlier than investors had previously anticipated. 

Europe delivers a round of Gross Domestic Product (GDP) figures on Tuesday, headlined by pan-European GDP growth for the fourth quarter at 10:00 GMT. The US Federal Reserve’s (Fed) latest rate call is slated for Wednesday, to be followed by a Federal Open Market Committee (FOMC) press conference half an hour after the Fed’s monetary policy statement.

Daily digest market movers: EUR/USD sheds weight after ECB officials spark early rate cut hopes

• EUR/USD slipped further back on Monday after ECB board member and Banco de Portugal Governor Mário Centeno sparked rate cut hopes.
• ECB’s Centeno suggested the ECB should cut rates sooner rather than later to head off the possibility of European inflation declining too far below the ECB’s 2% target.
• ECB Centeno shrugged off the idea of the ECB waiting for first-quarter wage growth figures before punching the rate cut button, claiming there are no second-round inflation effects of wage increases.
• ECB board member Centeno is not in the ECB Governing Council vote rotation until March.
• Money markets have fully priced in a first rate trim from the ECB of 25 basis points in April.
• Rate swaps expect 149 basis points in ECB rate cuts through the end of the year.
• ECB policymaker and Slovakian central bank chief Peter Kazimir quickly followed Centeno, stating that a June rate cut is far more likely than April.
• ECB’s Kazimir pulled in the reins, claiming that rate cut talk remains ‘premature’, but agreed the top of the rate hike cycle has peaked and the ECB’s next move will be a cut, but only when appropriate.
• ECB Vice-President Luis de Guindos followed up by agreeing that inflationary risks are on the downside but reiterated that the ECB’s policies will reflect available data.
• Fed Chairman Jerome Powell is expected to deliver language on Wednesday that corroborates money market bets of a benchmark rate cut in May.
• Rate swaps are pricing in nearly a 90% chance of at least 25 basis points off the top from the Fed before June.

Technical Analysis: EUR/USD tests low-side barriers, resistance zones piling up above 1.0850

Monday saw EUR/USD decline over eight-tenths of a percent peak-to-trough from Friday’s near-term peak at 1.0886, and the pair continues to waffle below the 200-hour Simple Moving Average (SMA) descending into 1.0870.

Technical resistance has piled up in a familiar zone just below the 1.0900 handle, capping off intraday momentum to the top side and chaining EUR/USD into a defensive position as bids test old chart territory.

Daily candlesticks show the way open for a bearish test into December’s swing lows near 1.0750 as price action churns into the low side of the 200-day SMA near 1.0850. The pair’s ongoing pattern of higher lows is set for a challenge if buyers aren’t able to prop the pair back up over the 50-day SMA near 1.0925.

EUR/USD Hourly Chart

EUR/USD Daily Chart