EUR/USD stalls the recent recovery from multi-month low despite subdued USD demand

• EUR/USD fails to capitalize on this week’s modest recovery from a multi-month low.
• The USD extends its subdued range-bound price action and lends support to the pair.
• Bets that the ECB will start cutting rates in April cap the upside for the shared currency.

The EUR/USD pair continues with its struggle to move back above the 100-day Simple Moving Average (SMA) support-turned-resistance and remains below the 1.0800 mark through the early European session on Friday. The downside, however, remains cushioned in the wake of the recent hawkish remarks by several European Central Bank (ECB) officials and subdued US Dollar (USD) price action. Traders, however, seem reluctant to place aggressive directional bets and seek more clarity about the Federal Reserve's (Fed) rate hike path.

Hence, the market focus will remain glued to the release of the latest US consumer inflation figures, due next week, which might provide some cues about the likely timing and pace of Fed rate cuts in 2024. This, in turn, will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the EUR/USD pair. Heading into the key data risk, the markets have fully priced out early rate cuts and seem convinced that the Fed will keep rates higher for longer in the wake of a still resilient US economy.

The hawkish outlook remains supportive of elevated US Treasury bond yields, which is seen lending some support to the USD and capping the upside for the EUR/USD pair. That said, the prevalent risk-on mood could keep a lid on any further gains for the safe-haven buck in the absence of any relevant market-moving economic releases, either from the Eurozone or the US. The lack of any meaningful buying, meanwhile, suggests that the recent downward trajectory from the December swing high might still be far from over.

Daily Digest Market Movers: Traders seem non-committed amid ECB/Fed rate cut uncertainty

• The European Central Bank officials have been trying hard to temper market expectations for early interest rate cuts and lend some support to the EUR/USD pair amid subdued US Dollar demand.
• Governing Council member Pierre Wunsch said on Thursday that he would prefer to wait for more wage data, which is not compatible with the 2% inflation target, before deciding to cut rates.
• This comes on top of comments by ECB board member Isabel Schnabel on Wednesday, saying that the central bank must be patient with cutting interest rates as inflation could flare up again.
• Adding to this, the ECB's latest economic bulletin stated that the interest rate policy is unlikely to change before June despite the gloomy outlook that the Eurozone economy likely contracted in Q4.
• Expectations for the ECB interest rate cut at the start of the second quarter, however, have been growing stronger, which holds back traders from placing aggressive bullish bets around the shared currency.
• Data released on Thursday showed that US Initial Jobless Claims fell to 218K last week, pointing to a resilient labor market and reaffirming bets that the Federal Reserve will keep rates higher for longer.
• The uncertainty over the Fed rate cut path fails to provide any meaningful impetus to the US Dollar, which remains below a multi-month low and continues to act as a tailwind for the currency pair.

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

From a technical perspective, any subsequent move 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 should cap spot prices near a resistance marked by a one-month-old descending trend-line, around the 1.0860-1.0865 region. A sustained strength beyond, however, might shift the near-term bias in favor of bullish traders and lift the EUR/USD pair to the 1.0900 round figure. The momentum could get extended further towards the 1.0930 intermediate hurdle en route to the 1.0970-1.0975 region and the 1.1000 psychological mark.

On the flip side, the overnight swing low, around the 1.0740 zone, now seems to protect the immediate downside ahead of the 1.0725-1.0720 area, or a multi-month low touched earlier this week. This is closely followed by the 1.0700 mark, which if broken decisively will be seen as a fresh trigger for bearish traders and make the EUR/USD pair vulnerable. Spot prices might then accelerate the slide further towards the 1.0665-1.0660 support before eventually dropping to the 1.0620-1.0615 region and the 1.0600 round figure.