The Eurozone inflation report for March offered some relief to EURUSD bulls, with figures dipping slightly. This, coupled with receding Middle Eastern tensions, has fueled a modest Euro rebound. However, the outlook remains clouded by conflicting central bank stances.
However, the upside for the Euro remains limited. The ECB continues to express a dovish bias compared to the Federal Reserve. While ECB policymakers like François Villeroy de Galhau advocate for a rate cut as soon as June, recent comments from Madis Muller and Robert Holzmann suggest a more cautious approach, highlighting potential economic risks and geopolitical tensions as deterrents.
Across the Atlantic, hawkish rhetoric from Fed officials like Austan Goolsbee and Raphael Bostic continues to support the USD. They suggest that the Fed’s current restrictive policy is appropriate and that future rate cuts are unlikely before the end of the year. This divergence in central bank policy expectations could keep the Euro under pressure.
Technical Analysis
The 4-hour shows that the EURUSD is currently trading slightly higher at 1.06610, having recently broken above the 20-SMA (green line) but remains below the downward-sloping 50-SMA (blue line) and 100-SMA (orange line). This indicates a potential short-term bounce but suggests a prevailing downtrend. The Relative Strength Index (RSI) sits at 50.60, hovering around the midline, signifying neutral momentum.
With the RSI (50.60) firmly trading flat at the 50.00 level, the Euro weakness would likely offer short-term trading opportunities towards the 1.05998 support level in the near term. A successful break below the 1.05998 level would likely bring the major support level of 1.05166 into play in the short term.
However, sustained buying pressure and a push above the 50-SMA could leave the 1.07236 resistance level as the initial level of interest in the near term. A break above the initial resistance level, with significant volume, could confirm the bullish momentum, likely bringing the 1.08001 and 1.08829 resistance levels into play.
Summary
The EURUSD faces conflicting forces. Short-term relief from the Eurozone inflation report and easing Middle East tensions might be countered by the ECB’s cautious approach and the Fed’s hawkish stance. Technically, a break below 1.05998 indicates further Euro weakness, while a surge above 1.07236 would suggest a potential trend reversal.
Sources: TradingView, Trading Economics, MT Newswire, EUROSTAT, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
