- The recovery in the EUR/USD pair appears to have come to an end.
- Downward movements are expected during this week's trading, especially if the US Federal Reserve's decision on Wednesday is hawkish.
- Technically, the EUR/USD pair is stabilizing around 1.0895 at the time of writing the analysis, ahead of the release of eurozone inflation figures later today.
According to currency trading platforms, the 0.60% loss in the EUR/USD exchange rate on Thursday last week was a decisive move from a technical perspective. Until then, the EUR/USD was in a short-term uptrend that promised a final test of the big figure 1.10.
The selling was large by daily standards, putting a decisive end to the short-term uptrend and increasing the likelihood of further losses. According to analysts, "The euro's strength has been over since late last week and the price action has led to a temporary increase in downward momentum. Over the next few days, as long as the euro remains below that and at 1.0950, the euro is likely to trade with a bearish bias. At the moment, the chance of the euro breaking clearly below 1.0830 is not high."
In this regard, according to the forex research team at Berenberg Bank, "Only a close above 1.0970 will turn the sideways movement into an uptrend." They added, "However, until that happens, we are still in a correction phase of this year's downtrend, which has turned into a sideways trend."
The main risks for the forex market this week is the US Federal Reserve decision. With the release of inflation and payrolls data, the next major event facing the US dollar is the policy decision for March, which is scheduled to be released on Wednesday at 18:00 GMT. The Fed will keep US interest rates unchanged, and this is likely to be reflected in the recent “steadiness” in US inflation and strong data results.
Moreover, the extent to which the Fed's tone is hawkish on the need to keep interest rates steady will be interesting and could pose upside risks for the US dollar. Additionally, the Fed's new economic outlook and interest rate projections pose additional upside risks for the US dollar.
In contrast, attention will be on the eurozone PMI readings. At 9:00 GMT on Thursday, retail sales in the euro zone will be released, with markets expecting a reading of 50.5 for services, which confirms the sector’s return to growth. However, the manufacturing index is expected to come in at 47 and the composite at 49.7. Recently, the euro has benefited from a series of better-than-expected readings recently, suggesting that any decline in numbers would lead to some sort of disappointment that would lead to a healthy sell-off for the euro.
EUR/USD Technical analysis and forecast:
The downward correction trend persists according to the performance on the daily chart and bearish control over the EUR/USD pair will strengthen if it moves towards the psychological support level of 1.0800. As mentioned before, the psychological resistance level of 1.1000 will remain crucial till confirming the strength of the upward trend. This week, data and events week determine the fate of the EUR/USD, and it will remain in a neutral position until they are announced throughout the week.
Ready to trade our daily Forex analysis? We’ve made this forex brokers list for you to check out.