Technical Analysis

EUR/USD Price Analysis – March 31, 2023

By LonghornFX Technical Analysis
Mar 31, 20233 min

Daily Price Outlook

The EUR/USD is trading at 1.0916, up 0.14% in 24 hours. The currency pair increased to weekly highs amid surprisingly positive German inflation data. The Dollar fell following the GDP announcement, but risk-on sentiment supported the Euro.

Dollar Drops on GDP Report

The Federal Open Market Committee of the Federal Reserve increased interest rates by 25 basis points last week as anticipated. However, they did so with caution because of the uncertainty in the banking industry.

Additionally, US data released on Thursday showed that last week's jobless claims increased more than anticipated from the week before, indicating a cooling labor market. Likewise, fourth-quarter GDP growth came in at 2.6% as opposed to earlier estimates of 2.7%, supporting the claim for a softer Fed stance.

The GDP report fell short of expert estimates and provided another reason for the dollar to decline. Therefore, DXY is trading lower at 102.16. The weaker dollar made the EUR/USD pair stronger.

Moreover, expectations of a Fed pause or a 25 bps rate rise in May are almost equally divided, according to CME Group's Fedwatch tool.

The core PCE price index, which the Fed prefers to use as a measure of inflation, will be released on Friday and will offer more hints about the state of the world's largest economy.

Hopes for Rate Hikes from ECB

In the Eurozone, German headline inflation fell to its lowest level since last summer in March. It declined after prices increased in March 2022. In contrast to the expert consensus of 7.3%, Germany's inflation rate decreased from 8.7% in February to 7.4% in March.

Data indicate a sharper-than-anticipated drop in Germany's annual rate, which has reached its lowest level since August 2022. However, other than the costs of energy and commodities, there is currently no evidence of a broader disinflationary trend.

Germany's inflation fell sharply in March due to decreasing energy costs. However, it was still higher than expected, putting more pressure on the European Central Bank to tighten its monetary policy. As a result, the EUR/USD currency pair rises sharply when German inflation figures surprise the unexpected, boosting market sentiment.

As long as the current banking turmoil is controlled, the ECB will maintain the well-known distinction of using interest rates to combat inflation. The ECB will continue to tighten monetary policy since there are currently no signs of a disinflationary trend, even after considering energy and commodity prices. Therefore, with the ECB projected to hike borrowing costs a couple more times in the coming months, the Euro has room to appreciate even higher.

 EUR/USD Price Chart - Source: Tradingview

EUR/USD Intraday Technical Levels

Support      Resistance

1.0843          1.0946

1.0782          1.0988

1.0740          1.1049

Pivot Point:  1.0885

EUR/USD – Technical Outlook

The EUR/USD pair experienced further positive movements yesterday, surpassing the 1.0900 level and attempting to maintain its position above it. This bolsters the continuation of the anticipated bullish trend on an intraday and short-term basis, with the next target situated at 1.1032.

Consequently, we will maintain our bullish outlook for the upcoming period, consistently supported by the EMA50. It is important to note that breaching 1.0920 is crucial for the continuation of the upward trend, as failure to do so could create a negative pattern that may pressure the price to reverse course and head towards the 1.0805 area initially. Today's expected trading range is between 1.0840 support and 1.1000 resistance.

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