EUR/USD Dips Amidst Inflation Expectations; US Housing Recovery and ECB Rate Hikes in Focus

Posted Thursday, March 30, 2023 by
Arslan Butt • 2 min read
 EUR/USD trades at 1.0830, experiencing a 0.12% decline within 24 hours as the market anticipates US and German inflation data. The focus remains on the Fed’s preferred inflation measure, the Core PCE price index. In the US, the housing market continues its recovery, evidenced by an unexpected increase in Pending Home Sales for the third consecutive month in February. This development has bolstered the Dollar Index (DXY) by 0.11% to 102.75, causing pressure on the EUR/USD currency pair.

Following last week’s Fed policy decision, the market eagerly awaits inflation statistics to determine whether the Fed will maintain its rate hike trajectory. The release of the Core PCE price index on Friday will likely have a significant impact on market reactions.
The European Central Bank (ECB) raised interest rates by 50 basis points recently, but did not provide clear guidance on future rate adjustments. Although the bank is closely monitoring the Eurozone’s financial stability, it remains committed to fighting inflation. ECB policymakers, including Chief Economist Philip Lane, have emphasized the need for additional rate hikes to bring inflation below the 2% target.

The German GfK Consumer Confidence survey released on Wednesday showed a slight improvement but fell short of expert predictions. Despite this, the ECB’s commitment to tackling inflation remains unchanged. As the German CPI release approaches, it will serve as a crucial indicator for the Eurozone CPI, set to be released on Friday, as well as the ECB’s subsequent actions.

EUR/USD Technical Outlook

The EURUSD pair has been displaying limited fluctuations since yesterday, stabilizing around the 1.0840 level. It is worth noting that the stochastic indicator is shedding its negative momentum significantly and nearing oversold territory, while the EMA50 continues to offer positive support for the price.

Hence, the possibility of resuming the anticipated bullish trend for the near future remains, with the next major target set at 1.1032. It is crucial to maintain a level above 1.0745 in order to achieve the proposed objectives. Moreover, the price must surpass 1.0870 to facilitate the upward movement towards the anticipated target.

For today, the projected trading range lies between 1.0770 as support and 1.0935 as resistance.

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