Euro Dollar Outlook: EUR/USD Takes a Breather as Prices Test Support

Euro Dollar (EUR/USD) Talking Points:

• EUR/USD clings to the 50-day moving average (MA) as prices struggle to break free from a broader range of support and resistance.
• Euro eases after failing to break above 1.090
• US Dollar remains vulnerable diminishing growth forecasts and a higher probability of a recession.

EUR/USD has been on a steep uptrend since September 2022, driven by a hawkish ECB (European Central Bank) and a weaker Dollar. While the Federal Reserve hiked rates aggressively throughout last year, market participants have been anticipating a slower pace of tightening or a near-term pivot.

As the ECB (European Central Bank) remains committed to raising rates until inflation shows significant signs of easing, higher rates have contributed to the recent move. With the hawkish rhetoric expressed by Fed Chair Jerome Powell at last month’s summit, the repricing of rate expectation boosted demand for the Dollar. However, after falling to prior support at 1.0524 on 8 March, the collapse of SVB (Silicon Valley Bank) and Signature Bank raised concerns about the health of the US banking system.

EUR/USD Price Analysis

After rising above trendline resistance (taken from the 2021 high) in January, a weaker Dollar and a hawkish ECB (European Central Bank) allowed Euro to gain against the greenback. With EUR/USD surging to the 50% Fibonacci retracement (the mid-point) of the 2021 – 2022 move, prices continued to climb before peaking at the February high of 1.103. This was followed by a sharp pullback that saw EUR/USD retest support at the March low of 1.0523 before heading higher.

While a zone of co range of technical support and resistance forming between the March low and the 50-day MA (1.073) Wednesday’s FOMC meeting allowed prices to enjoy an additional boost of confidence.

EUR/USD Daily Chart

Chart prepared by Tammy Da Costa using TradingView

With bulls failing to gain traction above 1.090, the 50-day MA came back into play and continues to provide support for the short and longer-term move.

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As fundamentals remain at the forefront of risk sentiment, the economic calendar highlights high impact data releases that may contribute to driving volatility and price action next week.

DailyFX Economic Calendar

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707