Euro Forecast: USD Maintains Control of EUR/USD Price Action Despite Positive EZ Data
BACKDROP EUROPEAN FUNDAMENTAL
The eurozone got many major economic data prints today (see economic calendar below) but did not necessarily reflect the data via the EUR/USD currency pair. Although French inflation fell short of expectations, the actual amount of 6% represents an improvement over the December rate, while the German job market remained strong.
This sort of information would be anticipated to fuel hawkish bets for the forthcoming ECB meeting, but the trading session from Asia and throughout the European day appears to be risk-off. The USD has naturally benefited from this reluctance, but a hawkish bent to tomorrow's Fed meeting is also on the agenda.
A rate rise of 25 basis points is improbable, but the Fed's firm stance on attaining a peak rate of 5% by 2023 may be repeated, despite market pricing discounting their forecast. EZ GDP increased QoQ, but not sufficiently to give upward support for the Euro. However, tightening credit requirements in Q1 weighed on euro pricing. Borrowing by businesses and households is declining, which might indicate that the ECB's rate rises are finally taking effect.
US consumer confidence will round out the trading day later today, and while this is a big impact event, it shouldn't dissuade prices too much ahead of the Fed meeting tomorrow.
The EUR/USD daily chart shows price movement coming off the psychological resistance mark of 1.0900, with the euro losing ground versus the greenback for four days in a row (last seen in October 2022). Bearish/negative divergence is possible, with fading bullish momentum shown by the Relative Strength Index (RSI). revealing potential downside if the Fed acts aggressively tomorrow.
Resistance levels:
- 1.0936
- 1.0900
Support levels:
- 1.0774
- 0.8800
- 0.8769