EUR/USD Price Action:
- EUR/USD remains range-bound around 1.0830.
- The US Dollar has alternated gains and losses.
- Investors await the release of US inflation data (PCE).
Interest Rate Expectations:
- Both the Federal Reserve (Fed) and the European Central Bank (ECB) are expected to initiate easing cycles.
- The Fed may cut rates in June, while the ECB is likely to follow suit shortly thereafter.
Global Economic Outlook:
- A relatively subdued euro area economy and a potential "soft landing" for the US economy support the case for a stronger dollar.
- EUR/USD could experience a correction, initially targeting 1.0700 and potentially revisiting 1.0500.
Technical Analysis
Daily Chart:
- Resistance: 1.0981 (March high), 1.0998 (weekly top), 1.1000, 1.1139 (December 2023 peak)
- Support: 1.0837 (200-day SMA), 1.0694 (2024 low), 1.0516 (November 2023 low), 1.0495 (weekly low), 1.0448 (2023 low), 1.0400
4-Hour Chart:
- Support: 1.0801, 1.0761
- Resistance: 1.0942, 1.0963, 1.0998
- Indicators: MACD negative, RSI near 45
Premium Analysis
Drivers of USD Strength:
- The strength of the dollar is attributed to expectations of a "soft landing" for the US economy and the likelihood of interest rate cuts by both the Fed and the ECB.
ECB Policy Outlook:
- ECB policymakers have signaled their intention to begin cutting rates soon, possibly as early as June.
Implications for EUR/USD:
- The convergence of monetary policy easing by both the Fed and the ECB is expected to weigh on EUR/USD.
- EUR/USD could experience a correction, with potential targets at 1.0700 and 1.0500.
Table: Interest Rate Outlooks
| Central Bank | Rate Cut Expectations |
|---|---|
| Federal Reserve | June 2024 |
| European Central Bank | June 2024 |
List: Economic Factors Influencing EUR/USD
- US inflation tracked by the PCE
- Relative strength of US vs. euro area economy
- Outlook for monetary policy easing by the Fed and ECB
Bottom Line
EUR/USD is expected to weaken in the medium term as expectations of interest rate cuts by both the Fed and the ECB weigh on the euro. A correction could target 1.0700 and potentially revisit 1.0500. Technical indicators on the 4-hour chart suggest potential for a bounce, but the overall trend remains bearish.