EUR/USD Remains Steady Amid Diverse Market Factors and Central Bank Policies
The EUR/USD pair maintains its positive trajectory for the second consecutive day, although it lacks significant follow-through, staying within the range established the previous day. During the Asian trading session, spot prices stabilized above the mid-1.0900s, drawing support from the US Dollar’s (USD) softened stance.
The USD Index (DXY), a measure of the dollar against a basket of currencies, continues to retract from its near three-week peak reached last Friday. This retreat is fueled by growing expectations of a shift in the Federal Reserve’s policy direction, as indicated by the New York Fed’s recent report.
This report revealed a significant drop in US short-term inflation projections, the lowest in almost three years, which, coupled with positive Asian market sentiments, weakens the dollar’s safe-haven appeal, providing a boost to the EUR/USD pair.
Conversely, the Euro benefits from the European Central Bank’s (ECB) expectations to maintain high-interest rates, reinforced by last month’s predicted surge in Eurozone inflation. ECB official Boris Vujcic’s recent statement underscored that rate cuts are not anticipated before the summer, forecasting a gradual decline in Eurozone inflation. However, market predictions of a 25 basis point ECB rate cut by April pose a challenge to the Euro.
Additionally, the robust US labor market, as highlighted in the recent employment report, affords the Fed more flexibility in maintaining higher interest rates. Recent less dovish remarks by Fed officials have also moderated expectations for aggressive policy easing, supporting higher US Treasury yields.
The yield on the 10-year US government bond, maintaining above 4.0%, limits potential downsides for the dollar.
Given these mixed fundamentals, it’s advisable to await strong buying momentum before anticipating further upward movement in the EUR/USD pair. Traders are now eyeing the release of German Industrial Production, French Trade Balance, and Eurozone Unemployment Rate data for direction.
Later in the US session, a speech by Governor Michael Barr might offer short-term trading opportunities, but many investors are likely to hold off until the release of US consumer inflation figures on Thursday.
EUR/USD Technical Outlook
The EUR/USD pair is exhibiting a bullish bias, attempting to breach the 1.0960 level. The price formation of higher lows suggests a possible confirmation of this breach, potentially leading to a rise.
However, there are still indications of a negative pattern in the form of a head and shoulders, adding bearish pressure on both intraday and short-term scales.
Due to the contradiction in technical factors, a cautious approach is recommended until a clearer trend signal emerges. A breach of 1.0995 would confirm an upward trend and target gains starting at the 1.1080 areas, while breaking the 1.0920 support level would signal a return to a declining trend, aiming for 1.0860 as the first bearish station.
The expected trading range for today is between 1.0870 support and 1.1050 resistance, with a neutral outlook for the day’s trend.
EUR/USD Live Chart
ABOUT THE AUTHOR
See More
Sidebar rates
Add 3442
Related Posts
SaveAdd 3440
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals