Daily Price Outlook
The EUR/USD experienced a decline against the dollar in European trading for the second consecutive day after data revealed a significant slowdown in European inflation in March, diminishing the likelihood of a substantial interest rate increase by the ECB in March.
The dollar continues to strengthen, supported by optimistic predictions of a 0.25% Federal Reserve rate hike in May, marking the third consecutive increase.
EUR/USD dropped 0.5% to 1.0788, reaching a session-high of 1.0844, following a 0.6% loss on Friday, which was the first decline in five days due to weaker European inflation data.
The euro appreciated over 1.3% against the dollar in the first quarter, marking the second consecutive quarter of gains, driven by the ECB's actions.
The European Central Bank persistently worked to counteract record inflation in the eurozone by raising interest rates more rapidly than the Federal Reserve.
Preliminary data indicated that consumer prices in the eurozone increased by 6.9% in March, the slowest pace since February 2022 and the most significant inflation drop to date, down from 8.5% in the previous reading and below the 7.1% estimate.
Such figures eased inflationary pressures on ECB policymakers and negatively impacted predictions for aggressive ECB policy tightening in the coming months. On Monday, the dollar index climbed 0.45% against a basket of major competitors.
The dollar is profiting from its status as an alternative investment, with investors now concentrating on the Federal Reserve's forthcoming policy actions to curb inflation. Expectations for a 0.25% rate hike by the Fed in May stand at 61%, while the odds of no policy changes remain at 39%.
EUR/USD – Technical Outlook
The EURUSD pair has been experiencing sluggish trading activity since the morning, with the stochastic indicator entering oversold territories. This is anticipated to encourage the price to reinitiate the upward trend in forthcoming sessions, with the next target being set at 1.1032.
The ascending channel continues to structure the proposed bullish wave, which will persist as long as the 1.0850 level is not breached and remains below it.
Today's anticipated trading range lies between a 1.0850 support level and a 1.1000 resistance level.
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