EUR/USD Forecast: Euro remains fragile as focus shifts to US inflation data, Fed
- EUR/USD fluctuates at around 1.0750 in the European session on Wednesday.
- The technical outlook suggests that the bearish bias stays intact.
- US inflation data and Fed policy decisions could trigger the next big action in the pair.
EUR/USD closed the third consecutive day in negative territory on Tuesday and touched its lowest level in a month at 1.0720. Although the pair clings to small gains at around 1.0750 early Wednesday, the technical outlook is yet to point to a buildup of recovery momentum.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.46% | -0.29% | 0.30% | -0.08% | -0.48% | -0.57% | -0.08% | |
| EUR | -0.46% | -0.41% | 0.08% | -0.29% | -0.67% | -0.77% | -0.28% | |
| GBP | 0.29% | 0.41% | 0.62% | 0.14% | -0.26% | -0.36% | 0.13% | |
| JPY | -0.30% | -0.08% | -0.62% | -0.37% | -0.85% | -0.97% | -0.32% | |
| CAD | 0.08% | 0.29% | -0.14% | 0.37% | -0.36% | -0.50% | 0.00% | |
| AUD | 0.48% | 0.67% | 0.26% | 0.85% | 0.36% | -0.10% | 0.39% | |
| NZD | 0.57% | 0.77% | 0.36% | 0.97% | 0.50% | 0.10% | 0.50% | |
| CHF | 0.08% | 0.28% | -0.13% | 0.32% | -0.01% | -0.39% | -0.50% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for May. On a monthly basis, the CPI is forecast to rise 0.1%. The core CPI, which excludes volatile food and energy prices, is seen increasing 0.3% in the same period. In case the monthly core CPI comes in below the market expectation, the initial market reaction could cause the US Dollar (USD) to weaken against its major rivals. Investors, however, could refrain from taking large positions ahead of the Federal Reserve's (Fed) monetary policy decisions.
The Fed is widely expected to leave the policy rate unchanged at 5.25%-5.5% following the June policy meeting. Alongside the policy statement, the Fed will also release the revised Summary of Economic Projections (SEP), the so-called dot plot.
In March, the SEP showed that policymakers were forecasting three 25 basis points (bps) rate cuts in 2024. Market participants will scrutinize the rate projections in the new dot plot.
In case the dot plot shows that Fed officials foresee a single 25 bps rate cut this year, the USD could gather strength and weigh on EUR/USD. On the other hand, the USD is likely to come under pressure if the publication points to a total of 50 bps reduction in the interest rate in 2024. According to the CME FedWatch Tool, markets are currently pricing in a nearly 50% probability that the Fed will leave the policy rate unchanged in September.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays well below 50 despite the latest rebound, suggesting that EUR/USD is in a correction phase. On the upside, 1.0760 (Fibonacci 50% retracement of the latest uptrend) aligns as immediate resistance before 1.0790-1.0800 area, where the Fibonacci 38.2% retracement level meets the 100-day and the 200-day Simple Moving Averages (SMA), and 1.0850 (static level, 100-period SMA on the 4-hour chart).
First support is located at 1.0730 (Fibonacci 61.8% retracement) ahead of 1.0700 (psychological level, static level) and 1.0670 (Fibonacci 78.6% retracement).
Economic Indicator
FOMC Economic Projections
At four of its eight scheduled annual meetings, the Federal Reserve (Fed) releases a report detailing its projections for inflation, the unemployment rate and economic growth over the next two years and, more importantly, a breakdown of each Federal Open Market Committee (FOMC) member's individual interest rate forecasts.
Read more.Last release: Wed Mar 20, 2024 18:00
Frequency: Irregular
Actual: -
Consensus: -
Previous: -
Source: Federal Reserve
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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.
