EUR/USD Technical Analysis: Trend Change is Far Away – 13 March 2023
Since the middle of last week’s trading, the price of the EUR/USD currency pair was in an upward rebound range after it collapsed to the support level of 1.0524.The rebound gains were the strongest in last Friday’s session, as it jumped to the resistance level of 1.0700, before closing the week’s trading around the level of 1.0638.Friday’s gains were in light of the US dollar’s decline amid mixed US jobs report numbers.
In general, the EUR/USD exchange rate approached the top of the major currency board last week and was directed as a buy in Nomura Bank ahead of the European Central Bank’s interest rate decision and the expected update for March. The single European currency had risen against the vast majority of its peers in G20 currencies by Friday, but with the Swiss Franc, Japanese Yen, US Dollar and Sterling Pound not far behind after several currencies helped slump US government bond yields.
US yields fell while Fed interest rate futures market expectations declined late in the week, but these and other factors could lift the euro further against the dollar in the coming days.
Commenting on this, Jordan Rochester, FX Analyst at Nomura said, “This week’s ECB meeting is likely to hit a hawkish tone after the release of strong core CPI data in the Eurozone. In addition, terms of trade in the eurozone have continued to rise, ETF inflows from foreign investors are accelerating and US energy prices are declining,” he adds. US interest rates have been a drag on the euro lately.”
Market implied expectations for the US money price were raised sharply to mean an increase to 6% later this year after congressional testimony from US Federal Reserve Chairman Jerome Powell indicated that the FOMC could respond aggressively to any recovery. New inflation in the United States.
US economists at Nomura expect a half-percentage-point increase in the benchmark interest rate for March, but say that by the second quarter of the year, inflation is likely to be on a clear enough downward trend for the Federal Reserve to call an end to the US interest rate cycle.
“The good news is that US energy prices fell in February, which reduced at least some of the risks of a strong headline number,” the bank analyst added, referring to US inflation numbers released next Tuesday, which represent a risk to the euro pair. EUR/USD. “But expectations for a March rate hike are already relatively high, and there is a lot to pricing the ECB’s final interest rate from our point of view as well,” he adds.
Fortunately for the euro-dollar rate, economists at Nomura may have recently raised their final ECB deposit rate forecast to 4.25%, higher than the latest implied market forecast. That could potentially help the EUR this week if the latest ECB inflation forecasts indicate that this policy prescription is worth it. The European economy stalled in the fourth quarter of last year, but recently released data point to a modest recovery in the new year while Eurostat numbers last week indicated that inflation remained stubborn in February.
Eurozone inflation eased to 8.5% in February but from an upwardly revised level of 8.6% while the more important core inflation rate rose from upwardly adjusted 5.3% to 5.6% in a second consecutive challenge to the European Central Bank’s expectations for moderate price growth in January and February.
Nomura’s team targets EUR/USD to recover to 1.11 by the end of June.
Despite Friday’s rebound, the price of the euro/dollar currency pair, EUR/USD, is still in a downtrend range. The stability is below the 1.0600 support, which confirms the bears’ control over the trend and warns of a continuation of the downward move. Supportive of tightening US Federal Reserve policy.
On the other hand, according to the performance on the daily chart below, the bulls need stability above the resistance 1.0860, to be an opportunity to change the general trend to a strong and continuous bullish one. Today, the EUR/USD currency pair does not await important and influential data, and accordingly, the US jobs numbers will have an echo on the markets and investor sentiment.
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