EUR/USD at 1.0832: Awaits Q4 GDP Ahead of FOMC & Fed Fund Rate

The EUR/USD is experiencing a minor recovery, navigating below the 1.0840 threshold during Tuesday’s early trading hours in Asia. This uptick is largely attributed to a subdued U.S. Dollar and a retreat in U.S. Treasury yields.

Investors are now looking for the forthcoming release of preliminary Q4 GDP figures from Germany and the broader Eurozone, which precede Wednesday’s critical Federal Open Market Committee (FOMC) meeting. The pair is trading around the 1.0832 mark, registering a modest increase of 0.01% for the day.

ECB’s Stance on Interest Rates Amid Inflation Concerns

European Central Bank (ECB) policymaker Peter Kazimir has emphasized a cautious approach to altering interest rates, aiming to preserve the strides made in inflation control.

Kazimir highlighted the perils of hasty decisions in the face of short-term economic fluctuations, advocating for a more measured approach until a clearer medium-term outlook emerges.

Echoing this sentiment, Bank of France Governor François Villeroy de Galhau indicated that rate reductions are on the ECB’s agenda for the current year, with deliberations set to intensify at the upcoming meeting on March 7.

Economic Forecasts and Fed Policy Watch

The imminent advanced Q4 GDP report for the Eurozone, projected to show a 0.1% quarter-on-quarter contraction and stability year-on-year, can influence the Euro’s strength. A weaker-than-anticipated GDP could pressure the EUR/USD exchange rate downward.

Across the Atlantic, the Federal Reserve is expected to maintain its interest rate stance, although speculation about a potential 25 basis point cut in March persists. The CME FedWatch Tool indicates a nearly even split in market predictions for a rate reduction at the Fed’s next gathering.

Market participants are now looking forward to the German and Eurozone GDP data for Q4, alongside U.S. labour market insights from the JOLTS Job Openings and consumer sentiment metrics from the Conference Board.

With the FOMC meeting approaching on Wednesday, these economic indicators are poised to shape market expectations and influence the near-term trajectory of the EUR/USD pair.

EUR/USD Technical Outlook

The EUR/USD pair demonstrates a tentative stance in its 4-hour chart, exhibiting a pivotal movement around the green line at 1.08301, the current pivot point.

The currency duo finds its immediate support levels delineated by the black lines below the pivot, at 1.07970, 1.07672, and 1.07340, suggesting potential areas where the euro might find a floor against the dollar.

Conversely, resistance levels above the pivot stand at 1.08701, 1.08822, and 1.09228, serving as thresholds where upward momentum may face hurdles. The pair is confined within a descending channel pattern, reinforcing the possibility of a continued downtrend.

Such a channel indicates sustained selling pressure, with each rebound off the channel’s upper boundary potentially leading to a further decline. The Relative Strength Index (RSI) hovers around 43, underlining a bearish momentum without venturing into the oversold territory. This could imply a potential for further decline without immediate reversal.

Today, the focus will be on 1.07970 to take a buy position; however, the failure to cross above 1.08403 can also trigger selling.

EUR/USD Live Chart