- The ECB will likely maintain its interest rates at 4% for an extended period.
- Traders await interest rate decisions from major central banks.
- Janet Yellen stated on Monday that she saw no indications of a US recession.
Today’s EUR/USD outlook is bearish as the ECB will likely pause rate hikes after reaching 4%. ECB policymaker Francois Villeroy de Galhau announced on Tuesday that the European Central Bank would maintain its interest rates at 4% for an extended period as part of its strategy to combat inflation.
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Moreover, he likened inflation to an ailment and interest rates as the remedy. He stated that the remedy was beginning to show its effectiveness and that they deemed 4% to be an appropriate level. Therefore, they intend to keep rates at this level for a significant duration.
Notably, the ECB raised its main interest rate to a historic high of 4%, indicating that this recent increase was likely the final. This is due to the slowing economy in the Eurozone.
Meanwhile, the US dollar experienced a slight decline against a basket of currencies on Monday. Still, it remained close to a six-month high in subdued trading. Traders awaited interest rate decisions from the Federal Reserve, Bank of England, and Bank of Japan later in the week. Furthermore, the dollar achieved its ninth consecutive weekly gain last week, marking its longest winning streak in nearly a decade.
Elsewhere, US Treasury Secretary Janet Yellen stated that she saw no indications of an economic downturn in the United States. The continued strength of the US economy has contributed to the recent rebound in the dollar.
EUR/USD key events today
Investors will watch data from the Eurozone and the US, including:
- The Eurozone inflation report.
- The US building permits report.
EUR/USD technical outlook: Weak rebound may retest 1.0800.
On the charts, the EUR/USD has plunged to the 1.0650 support level, where bears have given way to a feeble rebound. The bias is bearish as the price has swung far below the 30-SMA while the RSI trades in bearish territory below 50.
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The current rebound is weak but might retest the 1.0800 key level as resistance. At the same time, it would retest the 30-SMA resistance before bears retake control. A break below the 1.0650 level would indicate a continuation of the downtrend.
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Saqib Iqbal
