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EUR/USD Eyes $1.0627 Pivot as ECB Rate Speculations Intensify Post-Inflation Data

The EUR/USD pair is poised for potential fluctuations following the release of the Eurozone’s final March inflation figures at 9:00 GMT on Wednesday.

EUR/USD Price Chart - Source: Tradingview

Impact of Inflation on Monetary Policy:

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Inflation levels are critical as they guide the European Central Bank’s (ECB) interest rate decisions—principal factors influencing the forex market dynamics.
The final data, aligning with the initial estimates, shows a core Harmonized Index of Consumer Prices (HICP) increase of 2.9% year-over-year, consistent with expectations and slightly down from the previous 3.1%.
The overall HICP rose by 2.4%, maintaining the level observed in preliminary estimates and indicating a slight decrease from the previous 2.6%.

Rate Adjustment Speculations:

Should these final figures come in lower than expected, it might reinforce anticipations of an ECB rate cut as early as June. Lower interest rates typically diminish foreign capital inflows, likely depreciating the Euro and consequently lowering the EUR/USD price.
Conversely, an upward revision could suggest less certainty about an impending rate cut, potentially bolstering the Euro and aiding the EUR/USD recovery.

Influential ECB Communications:

Additionally, today’s schedule features speeches from ECB Executive Board members Piero Cipollone, Isabel Schnabel, and President Christine Lagarde herself, which could significantly influence EUR/USD volatility.
President Lagarde’s recent remarks hinted at a forthcoming rate cut, contingent on stable external conditions, especially with current oil price instability linked to Middle Eastern tensions.
These communications are crucial for traders to monitor, as they provide direct insights into the ECB’s policy trajectory, impacting the EUR/USD price forecast.

Economic Events Recap and Ahead

Today’s economic calendar featured the release of key inflation data from the Eurozone at 9:00 AM, with both the Final Core Consumer Price Index (CPI) and the Final CPI year-over-year (y/y) figures aligning with market expectations:
  • Final Core CPI y/y: Reported at 2.9%, matching both the forecast and previous figure, indicating stable core inflation within the Eurozone.
  • Final CPI y/y: Also came in at 2.4%, consistent with prior estimates, reflecting steady consumer price inflation.

Looking ahead, the focus shifts to a significant event scheduled for 18:00:

  • ECB President Lagarde Speaks: Investors and analysts will be closely monitoring the speech by European Central Bank President Christine Lagarde. Her remarks are highly anticipated, as they could provide insights into the ECB’s future monetary policy direction, particularly in the context of current inflation rates and economic conditions within the Eurozone.

EUR/USD Price Forecast: Technical Outlook

The pivot point for today is set at $1.0627. This level is critical as it forms a baseline for determining the short-term trend. A sustained move above this point could signal an emerging bullish sentiment, potentially driving the pair towards higher resistance levels.
Immediate Resistance: The first resistance level is at $1.0682. If bullish momentum increases, the next hurdles are located at $1.0726 and $1.0786.
Immediate Support: On the downside, initial support lies at $1.0566. Should the pair experience further declines, subsequent support can be found at $1.0524 and $1.0467.

Technical Indicators:

The technical indicators reveal a bearish undertone: Relative Strength Index (RSI): The RSI is currently at 29, indicating that the EUR/USD is potentially oversold.
This condition suggests that there might be a pause or reversal in the downtrend if the market perceives the currency pair as undervalued.
EUR/USD Price Chart - Source: Tradingview
The 50 EMA stands at $1.0709, reinforcing the significance of this level as a longer-term bearish barrier. The EMA is above the current price, which typically suggests that the intermediate trend favours the bears.
The EUR/USD exhibits a bearish bias below the pivot point of $1.0627. A decisive break above this level could shift the market sentiment to a more bullish outlook.
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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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