EUR/USD Price Analysis – March 13, 2024
Daily Price Outlook
Despite the dovish remarks from ECB members, the EUR/USD currency pair managed to regain strength and turned bullish around the 1.0930 level. However, the upticks in the pair can be attributed to the bearish US dollar, which is losing its traction in the wake of increasing bets that the Federal Reserve (Fed) will begin cutting interest rates at its June policy meeting. The US dollar initially gained some support from the warmer US CPI report, but it was short-lived.
On the flip side, the report of Germany's Harmonized Index of Consumer Prices meeting expectations is likely to have a neutral impact on the EUR currency, as it reflects stability in inflation levels, which was already anticipated by the market. Meanwhile, the comments from ECB members regarding potential interest rate cuts have the potential to weaken the EUR currency, as they suggest a dovish stance from the ECB in response to inflation concerns, which could lead to lower interest rates.
Looking forward, traders are cautious, awaiting cues from upcoming US Core Producer Price Index (PPI) and Retail Sales data scheduled for release on Thursday.
Impact of ECB Policy Expectations on the EUR/USD Pair
On the Euro front, recent developments suggest a mixed outlook. The German Harmonized Index of Consumer Prices remained steady at 2.7% year-over-year, meeting expectations. However, there are indications from ECB officials, including Governing Council member François Villeroy de Galhau, of a potential interest rate cut in the spring. This is in response to progress in addressing inflation concerns.
Bank of France Governor Robert Holzmann believes a rate cut is more likely in June, citing the need for confirmed projections amidst high uncertainty. Governor Pierre Wunsch of the National Bank of Belgium also emphasized the ECB's need to consider a rate cut, despite challenges posed by wage inflation and price rises for services.
Therefore, the mixed outlook, with potential interest rate cuts from the ECB, weaken the EUR as uncertainty surrounding inflation and differing views among officials could lead to downward pressure on the EUR/USD pair.
Impact of Fed Policy Expectations on the EUR/USD Pair
Despite reports of higher consumer prices, the US dollar is under pressure as investors increasingly believe the Federal Reserve will start cutting interest rates as early as June. This belief, coupled with a generally positive market sentiment, is weakening the US dollar. The latest US Consumer Price Index (CPI) report showed a slight increase in inflation, with February's year-over-year rise at 3.2%, slightly higher than expected. The Core CPI, which excludes volatile food and energy prices, was also higher than anticipated at 3.8%. These numbers suggest a continued rise in inflation, impacting consumer purchasing power and the overall economy.
Therefore, the weakening US dollar could strengthen the EUR/USD pair as investors anticipate Fed interest rate cuts, boosting the euro's value against the dollar amid positive market sentiment.
EUR/USD - Technical Analysis
In the current trading environment, the EUR/USD pair has shown a slight decline of 0.01%, positioning itself at 1.0921. This minor adjustment mirrors the broader market's cautious anticipation of economic indicators and geopolitical events, influencing investor sentiment towards the Euro against the US Dollar.
Technical analysis reveals that the pair is trading just above a critical pivot point at 1.0914, hinting at underlying support that might pave the way for potential upward movement. Immediate resistance levels are identified at 1.0979, 1.1043, and 1.1106, marking potential hurdles the pair might face in its ascent. Conversely, support is observed at lower thresholds of 1.0868, 1.0817, and 1.0762, serving as vital markers that could trigger a bearish trend if breached.
The Relative Strength Index (RSI) stands at 51, suggesting a relatively balanced market with a slight tilt towards buying pressure. The 50-day Exponential Moving Average (EMA) at 1.0899 further supports the notion of a bullish bias, provided the pair maintains its stance above this moving average.
Conclusion: The EUR/USD pair exhibits potential for a bullish trend, conditional on sustaining above the pivot point of 1.0914. An entry price for buying is recommended above 1.09146, targeting a take profit at 1.09772, with a stop loss placed at 1.08731 to mitigate risks associated with unforeseen market movements.
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