|premium|

EUR/USD Forecast: All the attention is now on Powell and US data

  • EUR/USD met some initial resistance near 1.0850
  • The slight recovery in the Dollar weighed on the pair.
  • Markets’ focus now shifts to Powell’s testimony and US CPI.

The US Dollar (USD) managed to regain some composure on Monday, sparking some reaction in the USD Index (DXY) back towards the 105.00 region amidst a broad-based retracement in US yields across different maturity periods.

The pick-up in the Greenback reignited some selling pressure on EUR/USD, dragging it back to the 1.0830 zone amidst some easing political concerns after the French second round of elections on Sunday.

The macroeconomic landscape remained relatively stable on both sides of the Atlantic. The ECB is considering further rate cuts beyond the summer, with market expectations leaning towards two additional cuts by the end of the year. Conversely, market participants are speculating whether the Fed will implement one or two rate cuts this year, despite the Fed's current projection of a single cut, likely in December.

The latest Nonfarm Payrolls data (+206K jobs), however, lent extra belief to the idea that the Fed might start its easing cycle as soon as September.

According to the CME Group's FedWatch Tool, there is approximately a 77% chance of interest rate cuts in September, increasing to nearly 97% by December.

The ECB's rate cut in June, combined with the Fed's decision to maintain rates, has widened the policy divergence between the two central banks. This divergence could potentially lead to further weakening of EUR/USD in the short term. However, the prospects of economic recovery in the Eurozone, along with perceived weaknesses in US economic fundamentals, may mitigate this disparity and provide occasional support to the currency pair in the near future.

Looking ahead, the upcoming testimonies by Chair Jerome Powell and the release of US inflation figures tracked by the CPI are expected to be the key drivers for the pair’s price action, at least in the very near term.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further upside should put EUR/USD en route to test the July peak of 1.0845 (July 8), closely followed by the weekly high of 1.0852 (June 12) and the June top of 1.0916 (June 4). If the pair breaks above this level, it may bring the March peak of 1.0981 (March 8) back into focus, ahead of the weekly high of 1.0998 (January 11) and the psychological 1.1000 level.

If bears take control, spot may fall to its June low of 1.0666 (June 26), then the May low of 1.0649 (May 1), and finally the 2024 bottom of 1.0601 (April 16).

Looking at the big picture, more gains look to be on the way if the crucial 200-day SMA (1.0797) is consistently surpassed.

So far, the 4-hour chart suggests a continuation of the bullish impulse. The initial barrier level is 1.0845, then 1.0852. The nearest support is at 1.0784, then 1.0709, and lastly 1.0666. The Relative Strength Index (RSI) deflated below 63.

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to PremiumSign In

Author

Pablo Piovano

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

More from Pablo Piovano
Share:

Editor's Picks

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s  irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest 

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.