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EUR/USD eyes more downside below 1.0540 as US PCE propels hawkish Fed bets

  • EUR/USD is expected to show further weakness below 1.0540 as US inflation has rebounded.
  • Higher-than-anticipated US consumer spending resulted in an intense sell-off in the US equities.
  • ECB Lagarde has reiterated that a 50 bps interest rate hike announcement is on the table.

The EUR/USD pair is juggling in a narrow range above 1.0540 in the early Asian session. The major currency pair is likely to show more weakness after surrendering the immediate support of 1.0540 ahead. The downside bias for the shared currency pair is escalating after a surprise rebound in the United States Personal Consumption Expenditure (PCE) Price Index. A revival in the households’ spending in January has propelled the expectations that the Federal Reserve (Fed) will continue hiking rates till summer.

Investors dumped US equities after a higher-than-anticipated jump in consumer spending in January fueled the risk of more policy tightening by Fed chair Jerome Powell in March. S&P500 futures settled the week with losses of around 2.60%, portraying a risk-aversion theme.

Fed’s preferred inflation tool reported a surprise jump to 4.7% vs. the consensus of 4.3% and the former release of 4.7% on an annual basis. Consumer spending has jumped by 0.6% in January against a jump of 0.4% recorded in December. A strong employment cost index due to the tight labor market has fueled consumer spending due to higher funds with households for disposal.

The US Dollar Index (DXY) looks set to reclaim the critical resistance of 105.00 ahead amid the risk-off market mood. Meanwhile, rising expectations of more policy tightening by the Fed sent US Treasury yields higher. The return provided on 10-year US government bonds scaled to near 3.95%.

On the Eurozone front, European Central Bank (ECB) President Christine Lagarde reiterated the need for further interest rate hike by 50 basis points (bps) in March. ECB Lagarde cited “More tightening will be required if fiscal cooperation is absent.” She further added ''There is every reason to believe that we will do another 50 basis points in March.”

EUR/USD

Overview
Today last price1.0547
Today Daily Change0.0000
Today Daily Change %0.00
Today daily open1.0547
 
Trends
Daily SMA201.073
Daily SMA501.0726
Daily SMA1001.0451
Daily SMA2001.0331
 
Levels
Previous Daily High1.0614
Previous Daily Low1.0536
Previous Weekly High1.0705
Previous Weekly Low1.0536
Previous Monthly High1.093
Previous Monthly Low1.0483
Daily Fibonacci 38.2%1.0566
Daily Fibonacci 61.8%1.0585
Daily Pivot Point S11.0517
Daily Pivot Point S21.0488
Daily Pivot Point S31.0439
Daily Pivot Point R11.0596
Daily Pivot Point R21.0644
Daily Pivot Point R31.0674

Author

Sagar Dua

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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