EUR/USD analysis: at risk of falling further, Fed in the eye of the storm
EUR/USD Current price: 1.2288
- Political uncertainty left the pair directionless for a third consecutive week.
- US Federal Reserve expected to pull the trigger this Wednesday.
The EUR/USD pair ended a third consecutive week little changed around the 1.2300 level, as political uncertainty overshadowed macroeconomic data, preventing the development of a certain trend in the pair. Headwinds for the common currency came from ECB's members, who reiterated that sluggish inflation will keep QE in place for longer, cooling down expectations of a more aggressive European Central Bank. EU February CPI released on Friday reinforced the idea, as inflation rose 1.1% YoY, below the previous and market's expectations. Data coming from the US was mixed but overall positive. The greenback couldn't run, however, on Trump's decision to fire advisors and replace them with people more akin to his stance, particularly in foreign policy.
This week, the US Federal Reserve will gather all of the market's attention, as it will be the first with Jerome Powell as head and the market is expecting him to raise rates for the first time this year, in order to achieve the anticipated four hikes. The announcement is mostly priced in, and if the Fed disappoints by staying on hold, market's reaction will be more intense against the greenback that positive for the currency if they hike rates.
Daily basis, the pair seems to have lost bullish momentum, with a descendant trend line now coming at around 1.2380 for these upcoming days. The pair closed below a directionless 20 DMA, still holding some 200 pips above a bullish 100 DMA, while technical indicators diverge on direction around neutral territory, reflecting the ongoing uncertainty rather than anticipating next move. Shorter term, and according to the 4 hours chart, the risk is skewed toward the downside, as the pair settled below all of its moving averages that anyway remain directionless, while technical indicators hold near oversold readings, but with no directional strength. The 1.2260 region is the immediate support, with a break below it opening doors for additional declines ahead.
Support levels: 1.2260 1.2220 1.2180
Resistance levels: 1.2300 1.2335 1.2380
Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
