EUR/USD Forecast: Bulls take over as investors await first-tier news

EUR/USD Current price: 1.0880

• The US Dollar eased further ahead of the US Consumer Price Index data for March.
• The European Central Bank will announce its decision on monetary policy next Thursday.
• EUR/USD gains bullish traction in the near term and faces resistance at 1.0910.

The US Dollar kept shedding ground throughout the first half of Thursday, peaking during European trading hours at 1.0883. Speculative interest is trying to find out when central banks will kick start loosening their monetary policies, with the focus this week on the Federal Reserve (Fed) and the European Central Bank (ECB).

Financial markets were enthusiastic in December when the Fed shared the Summary of Economic Projections (SEP) or dot plot, anticipating at least three potential rate cuts this year. However, hopes cooled down after inflation heated up in January and March, to the point that investors are merely hoping for two rate cuts in 2024, with increased chances the first one could take place in July. Fed Chairman Jerome Powell clarified that officials are in no rush to trim rates, given the overall progressing economy and inflation holding above the central bank’s goal.

The US will release the March Consumer Price Index (CPI) on Wednesday, and it could be a game changer in terms of when the Fed will finally revert its current monetary policy. The annual CPI is foreseen at 3.4%, up from the 3.2% posted in February, while core annual inflation is expected to have risen to 3.7%, slightly below the previous 3.8%.

Across the Atlantic, the ECB will announce its decision on monetary policy next Thursday. European officials seem as cautious as their American counterparts, but at the same time, they are paving the way for a June rate cut. No changes are expected this time, but whatever they announce on future decisions will surely be a catalyst for EUR/USD.

Meanwhile, a scarce macroeconomic calendar exacerbates range trading. The ECB released the Bank Lending Survey (BLS), which showed banks reported a slight further tightening of their credit standards for loans or credit lines to enterprises in the first quarter of 2024. Additionally, net demand for housing loans saw a slight decline, while net demand for consumer credit was broadly stable.

Market players are also monitoring government bonds and yields. Bonds sunk on Monday, with yields soaring to fresh 2024 highs, although Treasuries changed direction ahead of Tuesday’s opening. At the time, the 10-year Treasury note yielded 4.38%, after flirting with 4.50% at the beginning of the week.

EUR/USD short-term technical outlook

The EURUSD pair has been advancing for over a week and slowly gaining bullish strength. The daily chart shows that the Momentum indicator cannot surpass its midline, although the Relative Strength Index (RSI) indicator heads north at around 56, reflecting increased buying interest. At the same time, the pair is recovering above its moving averages, albeit the 100 and 200 Simple Moving Averages (SMAs) remain directionless.

The uptrend is notable in the near term, according to the 4-hour chart. Technical indicators head firmly north within positive levels, while EUR/USD accelerates higher above all its moving averages. The 20 SMA reflects renewed near-term interest as it gains upward traction between the longer ones, which remain flat. The pair needs to clear 1.0910 to gain further bullish traction and extend gains towards the 1.1000 threshold in the following sessions.

Support levels: 1.0840 1.0800 1.0750

Resistance levels: 1.0910 1.0945 1.0990