FOREX Fundamental analysis for EUR/USD
EUR/USD remains in consolidation, although US stock indexes have moved to strengthen again, and comments from FOMC members indicate that the Fed is cautious about easing the rate and will not rush to this decision. At the same time, Germany's economic forecasts are deteriorating, which indicates growing risks for buyers of EUR/USD.
The first quarter of 2024 is coming to an end, and during this period the European currency has lost about 2% to the US dollar. This was due to changes in the monetary policy outlook of Central Banks and differences in economic growth. Bloomberg's forecasts for US GDP growth over the past 6 months have changed from 0.9% to 2.2%, while five major German think tanks have reduced expectations for German GDP from 1.3% to 0.1%.
Weak domestic demand, high energy prices and a significant reduction in investment in the Eurozone have become grounds for revising forecasts.
Investors doubt the possibility of a rapid recovery in the Eurozone, while the United States has performed better than analysts expected. This factor supports the pressure on the EURUSD.
A strong economy, a strong labor market and US inflation data, according to Christopher Waller, are arguments in favor of the Fed waiting for a reduction in the federal funds rate. The FOMC member considers it advisable to reduce monetary expansion and postpone its start, referring to the latest CPI and PCE data. After his speech, the chances of a Fed rate cut in June decreased to 63%, while in early March they were 75%.
The ECB, unlike the Fed, has no plans to postpone the start of the monetary policy easing cycle. The new member of the Governing Council, Piero Cipollone, is ready to vote for a reduction in the deposit rate in April, believing that wage growth has reached its peak and will decrease, as well as inflation.
There is a possibility that the ECB will begin easing earlier than the Fed, which, together with the good performance of the American economy, will put pressure on the EURUSD. If it weren't for the rally of American stock indexes, which help risky assets through currency correlation, the pair would already be significantly lower. Therefore, a breakdown of the $1.08 level or a rebound from the $1.084 and $1.087 resistances can be used to build up short positions with an eye to $1.07.
EUR/USD Technical analysis
EUR/USD continues its short-term bearish trend. Today, the pair is aiming to update the minimum of March 22. If sellers manage to gain a foothold below the extreme, then the Target area of 1.0729 - 1.0704 becomes their next target. If sellers fail to gain a foothold below the minimum, then EUR/USD will go into correction.
In case of a corrective movement, we will wait for the pair in the resistance areas (A) 1.0894 - 1.0885 or (B) 1.0940 - 1.0927. After testing these zones, we will generate new sales. The target will be the minimum mark of today.