EUR/USD Navigates Choppy Waters Amid Mixed Signals from Fed and ECB
During Wednesday’s Asian trading session, the EUR/USD pair experienced a modest ascent, temporarily halting the downward correction from the 1.0965 level, its highest since August 11. Currently, the pair is hovering around 1.0915-1.0920, with a slight increase of less than 0.10% on the day, predominantly influenced by the US Dollar’s performance.
The US Dollar Index (DXY), reflecting the dollar’s strength against a basket of currencies, finds difficulty in building on its modest overnight recovery from a near three-month nadir, significantly impacting the EUR/USD dynamics. The Federal Reserve’s recent meeting minutes underlined a commitment to sustained higher interest rates to combat inflation, fostering a brief surge in US Treasury yields and a consequent short-covering rally in the USD on Tuesday.
Despite this, market sentiment leans towards stability rather than further rate hikes by the US Fed, with anticipations of a potential rate reduction at the April 30-May 1 meeting. This outlook has led to the dip in yields of the benchmark 10-year US government bonds to a two-month low, thereby restraining the USD’s upward potential. Additionally, recent hawkish comments from ECB President Christine Lagarde have bolstered the Euro, providing momentum to the EUR/USD pair.
Lagarde, in her address in Berlin, emphasized the premature nature of easing inflationary pressures, tempering market expectations of an impending ECB rate cut, possibly as early as April. This cautious stance has curbed the enthusiasm of EUR/USD bulls, suggesting a wait-and-see approach for further buying signals beyond the 100- and 200-day Simple Moving Averages (SMAs) confluence.
Looking ahead, the absence of significant economic data from the Eurozone on Wednesday shifts focus to the US docket, featuring Weekly Initial Jobless Claims, Durable Goods Orders, and the revised Michigan Consumer Sentiment Index. These releases, alongside US bond yields and global risk sentiment, will likely shape USD demand and subsequently influence the EUR/USD trajectory.
From a technical perspective, the EURUSD pair encountered strong resistance at 1.0960, leading to a bearish pullback towards the 1.0900 mark. Stochastic indicators are shedding negative momentum, displaying oversold signals and now transitioning into a positive overlap, potentially driving the pair towards the breach of the resistance level and paving the way for an upward movement towards 1.1080.
Thus, the bullish outlook for EUR/USD remains intact, supported by the EMA50, barring a break below 1.0860 with a consistent daily closure underneath this threshold. The trading range for the day is projected between the support level of 1.0860 and the resistance at 1.1000, with the overall trend expected to be bullish.
EUR/USD Live Chart
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