- Money market traders predict that the Fed will only raise interest rates twice.
- ECB President Christine Lagarde said the ECB would continue raising rates to tame inflation.
- A decrease in natural gas costs and lessening recession fears were also helping bolster the euro.
Today’s EUR/USD price analysis is slightly bullish. The dollar remained weaker against the Euro on Tuesday, trading near a nine-month low as investors continued to assess the likelihood of an American recession and the direction of Federal Reserve policy.
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The euro gained strength on Monday due to remarks made by European Central Bank policymakers suggesting aggressive policy tightening.
According to Ray Attrill, head of the foreign exchange strategy at National Australia Bank, the US is no longer the cleanest shirt in the global economic laundry. He predicts that by the end of March, the dollar index will reach 100, and the euro will increase to $1.10.
Money market traders predict that the Fed will only raise interest rates twice as much, reaching a maximum of roughly 5% by June, and then drop rates twice more before the year is over. The Fed has asserted that an additional 75 basis points of tightening will likely come.
ECB President Christine Lagarde reiterated much of the bank’s most recent policy guidance on Monday, saying that the central bank will continue raising interest rates fast to tame the inflation that is still too high.
The Fed and the European Central Bank both have monetary policy meetings scheduled for next week, so major currency pairs were within comfortable ranges.
A decrease in natural gas costs and lessening recession fears were also helping bolster the euro.
EUR/USD key events today
Investors will pay attention to Purchasing Managers Index (PMI) data from Germany. This data will show the activity level in the manufacturing and services sector.
EUR/USD technical price analysis: Bears emerge at the 1.0900 key level
The 4-hour chart shows EUR/USD trading slightly above the 30-SMA and the RSI above 50. This is a sign that bulls are in control. However, the bullish trend shows signs of weakness, as seen in the bearish RSI divergence.
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Adding to this is that bears have shown strength at the 1.0900 resistance level. Bears made a strong engulfing bearish candle that could signal the start of a bearish move. However, bears will only take over if the price breaks below the 30-SMA.
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Saqib Iqbal
