The EUR/USD pair is currently in a state of neutrality, hovering around 1.0851 on Wednesday as investors eagerly wait for important updates. These updates include the US inflation data for March and the outcome of the European Central Bank (ECB) meeting on Thursday. The anticipation of these significant events is causing investors to proceed with caution.
The US inflation rate for March is expected to show a 0.3% month-on-month increase, which is slightly lower than the 0.4% rise observed in February. Similarly, the core Consumer Price Index (CPI) is projected to grow by 0.3% month-on-month. There is a market consensus that the US Federal Reserve will lower its interest rate by 75 basis points throughout 2024, with three separate 25-point cuts expected. Despite the rise in yields on US government bonds since the beginning of the year, the US dollar’s response has been relatively muted. The dollar has only appreciated by 2.5% against a 47-basis point increase in benchmark bond yields. This discrepancy suggests that the US dollar may need to catch up to Treasury yields, or that bond yields could decrease to align with the dollar.
On the other hand, the ECB’s interest rate is expected to remain at 4.5% per annum, with the European regulator likely to wait for the Fed’s actions before making any adjustments of its own. This is the case even though the eurozone has effectively managed high inflation before other developed economies, theoretically putting it in a position to adjust its monetary policy sooner than expected.
In terms of technical analysis, the H4 chart analysis of the EUR/USD pair reveals a correction wave towards 1.0883, followed by a decline to 1.0844. A narrow consolidation range has formed above this level, potentially leading to a correction towards 1.0904 and then a new decline towards 1.0790, possibly even reaching 1.0700. The MACD indicator on the chart, with its signal line above zero and the histogram declining, indicates a possible sharp decrease in the future. On the H1 chart, there is a consolidation range between 1.0850 and 1.0884. The market has returned to 1.0843, with the possibility of another correction wave to 1.0904 before a downward movement to 1.0790. The Stochastic oscillator, currently below 50, suggests a continuation of the decline towards 20, supporting a bearish outlook for the future movements of the EUR/USD pair.