EUR/USD Price Analysis – March 27, 2023
Daily Price Outlook
The EUR/USD is trading around 1.0766, gaining 0.07% in 24 hours. Anxiety related to banks has caused the euro to rise against a falling dollar, as better-than-expected economic data improved market sentiment.
Uncertainty Around US Monetary Policy
The market focus remains on Deutsche Bank, Germany's largest lender, as the next possible victim of the financial crisis. This is due to credit default swaps, which insure the bank against a potential credit crunch, climbing to near five-year highs last week, resulting in a massive sell-off of Deutsche's stock.
Concerning central bankers' remarks, Raphael Bostic, President of the Atlanta Federal Reserve, told NPR on Friday that while raising the policy rate was not an easy choice, he does not see the economy shrinking. According to Bostic, the Fed must control inflation.
Additionally, several Fed officials said the Fed could raise interest rates twice more. However, the direction of US monetary policy remains uncertain, especially as regulators take action to prevent further impacts on the banking sector.
Due to a lack of clarity over the direction of US monetary policy, the Dollar Index (DXY) dropped once again to 1.03.05. The falling dollar boosted the EUR/USD.
Markets will be eyeing the next reading of the personal consumption expenditures (PCE) price index, expected on March 31, for signals on how the release may impact the Fed's rate decisions.
The Hawkish ECB
Preliminary readings of the S&P Global PMIs for the Eurozone for March were released on Friday. The Manufacturing index came in at 47.1 versus 49.0 expected and 48.5 previously, but the Services PMI rose to a new 10-month high of 55.6 from 52.7 prior and 52.5 predicted. Consequently, the Composite PMI increased to 54.1 from 51.9 market expectations and 52.0 prior readings, which is a 10-month high.
Meanwhile, a rapid uptick in Deutsche Bank's credit default swaps has reignited market concerns. However, according to Reuters, ECB President Christine Lagarde assured EU leaders on Friday that the Eurozone banking industry is resilient, with robust capital and liquidity. Lagarde continued that the ECB is committed to returning inflation to 2% and will decide on future rates depending on incoming data.
Joachim Nagel, an official of the European Central Bank, added on Friday that raising policy rates to suitably restrictive levels would be required to bring inflation back down to 2%.
Largely positive European data and hawkish ECB comments have helped the euro recover. Moving forward, IFO data for Germany will guide the EUR/USD pair's intraday movements.
EUR/USD Intraday Technical Levels
Support Resistance
1.0791 1.0898
1.0754 1.0968
1.0685 1.1005
Pivot Point: 1.0861
EUR/USD – Technical Outlook
The EURUSD pair concluded last Friday above the 1.0745 level, maintaining stability and suggesting the potential for a new intraday bullish wave. This trend aims to achieve gains, beginning with testing the 1.0820 mark and extending to reach the recently recorded high of 1.1032 upon surpassing the previous level.
As a result, we can expect a bullish bias for today, bolstered by the EMA50 that coincides with the aforementioned support line, adding further strength. This is also supported by the clearly visible positive signals from the stochastic indicator. It is important to note that if the 1.0745 level is broken and the price remains below it, the proposed positive scenario will be halted, and the price will be pressured to decline, initially targeting the 1.0630 area.
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