The EUR/USD pair is currently maintaining a neutral stance, hovering around 1.0851, as the market eagerly awaits crucial updates. These updates include the US inflation data for March and the outcome of the European Central Bank (ECB) meeting set to take place on Thursday. Investors are approaching these impending events with caution, as they could potentially influence market movements significantly.
The US inflation rate for March is expected to demonstrate a 0.3% month-on-month increase, slightly lower than the 0.4% rise observed in February. Additionally, the core Consumer Price Index (CPI) is also projected to grow by 0.3% month-on-month. Market consensus hints at a possible reduction in the US Federal Reserve’s interest rate by 75 basis points over the course of 2024, suggesting three separate 25-point cuts. Despite the rise in yields on US government bonds, the US dollar’s response has been relatively muted, appreciating only 2.5% against a 47-basis point increase in benchmark bond yields. This discrepancy raises concerns about the potential convergence between the US dollar and Treasury yields, or the possibility of a decline in bond yields to bridge the gap.
The ECB’s interest rate is anticipated to remain at 4.5% per annum, with the European regulator likely to wait for the Federal Reserve to make moves towards easing monetary policy before implementing its own adjustments. This cautious approach is adopted despite the fact that the eurozone has effectively managed high inflation compared to other developed economies, theoretically positioning it to adapt its monetary policy sooner than expected.
Analyzing the technical aspects of the EUR/USD pair, the H4 chart indicates a correction wave up to 1.0883, followed by a decrease to 1.0844. A consolidation range has formed above the 1.0844 level, potentially leading to a correction towards 1.0904 before a new decline to 1.0790, with a possible continuation to the target of 1.0700. The MACD indicator highlights a potential sharp decline, with its signal line above zero and the histogram on a downward trajectory.
Moving to the H1 chart, a consolidation range is observed around 1.0850, extending to 1.0884. The market is currently at 1.0843, with a potential for another correction wave to 1.0904 before a downward movement to 1.0790. The Stochastic oscillator, currently below 50, signals a continuation of the decline towards 20, reinforcing the bearish scenario for the EUR/USD pair.
The market’s anticipation of key updates and data releases is crucial in determining the future movements of the EUR/USD pair. Investors are closely monitoring the US inflation data and the ECB meeting outcome, which could potentially drive significant shifts in the market dynamics.
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