- EUR/USD’s upside momentum faltered ahead of 1.0900.
- The ECB is seen keeping its rates unchanged this week.
- Investors’ focus now shifts to US CPI and FOMC Minutes.
EUR/USD traded slightly on the defensive despite hitting new multi-week tops in the 1.0885–1.0890 band earlier in the session, always against the backdrop of another uneventful session and vacillating price action in the Greenback.
Meanwhile, diminishing yields on both sides of the ocean accompanied humble losses in spot amidst an unchanged monetary policy framework, firm conviction that the ECB will hold its hand at its event later in the week, and increasing prudence ahead of the release of the US CPI and the FOMC Minutes, both due on Wednesday.
On this note, both the Federal Reserve (Fed) and the European Central Bank (ECB) are expected to initiate easing cycles, possibly starting in June. However, the pace of subsequent interest rate cuts may differ, potentially resulting in divergent strategies between the two central banks. Nevertheless, it is anticipated that the ECB will not significantly trail behind the Fed.
Regarding the Fed, N. Kashkari (Minneapolis) contended that potential rate cuts for the current year are at risk if inflation remains stagnant, whereas A. Goolsbee (Chicago) emphasized the need for the Fed to consider the effects of a restrictive policy stance, and FOMC Governor M. Bowman remarked that efforts to reduce inflation have hit a roadblock.
So far, according to the FedWatch Tool provided by CME Group, the likelihood of a rate cut in June has remained just above 56%.
Looking ahead, the relatively subdued fundamentals of the eurozone, coupled with the increasing probability of a "soft landing" for the US economy, reinforce expectations of a stronger Dollar in the medium term, particularly as both the ECB and the Fed may introduce easing measures almost simultaneously. In such a scenario, EUR/USD could undergo a more pronounced decline, initially targeting its year-to-date low around 1.0700 before potentially revisiting the lows observed in late October 2023 or early November below 1.0500.
EUR/USD daily chart
EUR/USD short-term technical outlook
On the upside, EUR/USD is expected to face initial resistance at the so-far April peak of 1.0885 (April 9) ahead of the March high of 1.0981 (March 8), and the weekly peak of 1.0998 (January 11), which precedes the psychological barrier of 1.1000. Further advances from here may result in a test of the December 2023 high of 1.1139 (December 28).
On the flip side, immediate contention emerges at the critical 200-day SMA at 1.0832 prior to the April low of 1.0724 (April 2) and the 2024 low of 1.0694 (February 14). Down from here comes the November 2023 low of 1.0516 (November 1), followed by the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the round milestone of 1.0400.
The 4-hour chart shows that the bullish tone remains in place for the time being. Next on the upside comes 1.0885 ahead of 1.0942. In the other direction, the next ] downward barrier appears to be the 100-SMA and 55-SMA of 1.0828 and 1.0809, respectively, ahead of 1.0791. The Moving Average Convergence Divergence (MACD) maintained the positive stance, but the Relative Strength Index (RSI) deflated to around 55.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
![EUR/USD stays below 1.1100, looks to post weekly losses](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/european-euro-coin-on-top-of-american-dollar-bill-11292130_XtraSmall.jpg)
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
![GBP/USD struggles to find a foothold, trades near 1.3150](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/iStock-157771037_XtraSmall.jpg)
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
![Gold retreats toward $2,500 ahead of the weekend](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/gold-bars-50657756_XtraSmall.jpg)
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
![Week ahead – Investors brace for NFP amid Fed rate cut speculation](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/america-back-to-work-gm178972493-25143312_XtraSmall.jpg)
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
![Easing Eurozone inflation to back an ECB rate cut in September](https://editorial.fxstreet.com/images/Macroeconomics/Countries/Europe/Eurozone_countries/Eurozone/eu-flags-flying-at-the-european-commission-building-brussels-belgium-24759579_XtraSmall.jpg)
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.