EUR/USD Forecast: Next bearish target aligns at 1.0940
- EUR/USD has failed to stage a recovery despite ECB's hawkish adjustment to QE.
- ECB President Lagarde's comments on rate outlook weigh on euro.
- The greenback preserves its strength ahead of the weekend.
The euro has failed to preserve its strength after rising sharply against the dollar with the initial reaction to the European Central Bank's (ECB) decision to end the QE sooner than planned on Thursday. EUR/USD stays on the back foot near 1.1000 early Friday and the pair is likely to extend its slide toward 1.0940 unless buyers manage to lift it back above 1.1040.
Following its March policy meeting, the ECB announced that the Asset Purchase Programme (APP), which was scheduled to end at the end of the year, will now end in the third quarter. In the policy statement, the ECB added that it stands ready to reverse changes made to the APP if the outlook changes.
During the press conference, however, ECB President Christine Lagarde clarified that the rate hike will not come right after the conclusion of the QE. "Any adjustment to the key ECB interest rates will take place sometime after the end of our net purchases under the APP (Asset Purchase Programme) and will be gradual," Lagarde said.
According to Reuters, money markets are now pricing in around 40 basis points (bps) rate hikes in 2022, compared to 30 bps on Wednesday.
Nevertheless, EUR/USD is struggling to shake off the bearish pressure with the greenback holding its ground against its rivals. The data from the US revealed on Thursday that the annual inflation, as measured by the Consumer Price Index (CPI), jumped to a fresh multi-decade high of 7.9% in February. Rising US Treasury bond yields on hot inflation data and the risk-averse market environment amid renewed fears over a further escalation of the Russia-Ukraine conflict provide a boost to the dollar ahead of the weekend.
EUR/USD Technical Analysis
EUR/USD was last seen testing 1.1000 (psychological level, Fibonacci 38.2% retracement of the latest downtrend, 50-period SMA on the four-hour chart). In case a four-hour candle closes below that level, additional losses toward 1.0940 (Fibonacci 23.6% retracement) and 1.0900 (psychological level) could be witnessed.
On the upside, 1.1040 (Fibonacci 50% retracement) aligns as the first resistance before 1.1100 (Fibonacci 61.8% retracement of the latest downtrend, psychological level) and 1.1120 (post-ECB high).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
