Daily Price Outlook
The EUR/USD is currently trading at $1.0646. China's release of the Caixin Manufacturing PMI has quelled concerns about a global recession, causing the risk-off sentiment to subside as expectations of an economic recovery rise. As a result, the US dollar has weakened in response to China's robust manufacturing sector. This has led to an increase in the value of the euro.
ECB Plans to Raise Interest Rates in Response to Higher Inflation
Regarding the Eurozone, four out of eight countries recorded manufacturing PMIs in the expansion range. However, the most recent report data revealed that manufacturing output throughout the Eurozone stabilized midway through the first quarter, ending an eight-month trend of declining output. The manufacturing PMI for the Eurozone decreased from 48.8 to 48.5, remaining the same as the preliminary figure of 48.5.
In the meantime, the annual Harmonised Index of Consumer Prices (HICP), which is the European Central Bank's (ECB) preferred measure of inflation, increased to 9.3% in February from 9.2% in January, surpassing experts' expectations of 9%. The higher-than-anticipated HICP indicates that the ECB may face difficulties in maintaining price stability.
Christine Lagarde, the President of the ECB, has already announced that the central bank plans to raise interest rates by 50 basis points in its March monetary policy.
Inflation in Germany exceeded market expectations, rising above the anticipated 8.5%. Market participants are now awaiting the release of European inflation data, which is expected later in the day. Even if the data exceeds the consensus forecast, little response is expected since most countries have reported their results. The European Central Bank (ECB) will also publish the minutes of its February meeting, which could potentially provide support for the euro.
Federal Reserve Signals Further Interest Rate Hikes to Combat Inflation
Federal Reserve (Fed) policymakers have maintained a hawkish stance, asserting that the current monetary policy is too weak and restrictive to curb inflation effectively. This suggests that additional rate hikes will be necessary to address inflationary pressures.
Additionally, the manufacturing PMI figure for February was 47.7%, which was 0.3% points higher than January's reading of 47.4%. Despite a 30-month expansion, this marks the economy's third consecutive monthly decline.
Based on the US ISM Manufacturing PMI range, inflationary pressures have resurfaced, indicating that the Fed should not rush to conclude its phase of policy tightening. As a result, the DXY is currently trading at 104.55, suggesting a decline in investor risk appetite due to expectations of interest rates.
EUR/USD Intraday Technical Levels
Pivot Point: 1.0641
EUR/USD – Technical Outlook
The EUR/USD is currently finding support at the $1.0645 level while facing resistance at the $1.0675 mark. On the 4-hour timeframe, the EUR/USD has formed an upward channel, indicating a possible uptrend for the EUR.
If the pair breaks above the $1.0680 mark, it could move toward the $1.0705 level, with further bullish momentum potentially leading to a breakout above $1.0735.
Leading technical indicators, such as the RSI and MACD, are currently holding above 50 and 0, respectively, indicating a bullish bias in the market.
Alternatively, if the pair breaks below the $1.0645 level, it could move toward the $1.0620 or $1.0580 levels, with further bearish momentum likely.
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