EUR/USD Price Analysis – March 01, 2024

Daily Price Outlook

Despite the ECB expected to cut its forecasts for inflation and growth at its March meeting next week, the EUR/USD currency pair maintained its upward bias and gained positive traction above 1.0820, mainly due to the bearish US dollar. The US dollar has been losing its traction amid renewed expectations of potential rate cuts later in the year by the Federal Reserve. However, the release of PCE inflation data suggests potential rate cuts by the Federal Reserve, which undermined the US dollar and contributed to the EUR/USD pair's gains.

In contrast to this, the European Central Bank (ECB) cutting forecasts for inflation and growth can weaken the euro because it signals potential economic weakness.

Fed's Hawkish Stance Fails to Bolster US Dollar Amid Rate Cut Speculation

On the Euro front, the European Central Bank (ECB) is anticipated to revise down its projections for inflation and economic growth at its upcoming March meeting next week. Although the ECB is scheduled to decide on interest rates on March 7. However, there is an expectation that the ECB will say that both inflation and economic growth are falling short of initial expectations. In response to weaker economic conditions, the ECB may consider implementing monetary policy measures to stimulate economic activity.

One such measure could be a cut in interest rates. By lowering interest rates, the ECB aims to encourage borrowing and spending, which can stimulate economic growth and inflation. However, the prospect of interest rate cuts can also have a downward effect on the shared currency.

US January PCE Price Index Confirms Decelerating Inflation and Potential Interest Rate Cut

On the US front, the January Personal Consumption Expenditure (PCE) Price Index fell in line with market expectations. The headline PCE, which contains all items, showed a year-over-year increase of 2.4%, while the Core PCE, which excludes volatile food and energy prices, stood at a 2.8% YoY increase. These figures confirm the ongoing trend of decelerating inflation in the United States.

However, recent data indicates that January witnessed the lowest inflation rate in three years, suggesting a notable slowdown in the rate of price growth for goods and services. This raises the prospect of an eventual interest rate cut by the Federal Reserve. Hence, the lower inflation rates typically ease pressure on central banks to maintain higher interest rates to curb inflation. Consequently, a potential interest rate cut undermined the US dollar and contributed to the EUR/USD pair gains.

EUR/USD - Technical Analysis

In today's EUR/USD technical outlook for March 1st, the currency pair shows a slight uptick, trading at $1.08140, indicating a modest gain of 0.08% over the past 24 hours. Analyzing the market through a 4-hour chart timeframe provides insights into short-term price movements, aiding traders in decision-making. Key price levels have been identified, with the pivotal point standing at $1.08228, delineating a crucial level for potential reversals or continuations. Notable resistance zones are observed at $1.08554, $1.08877, and $1.09265, while significant support levels are situated at $1.07904, $1.07379, and $1.06977, highlighting areas where price action may encounter barriers or support.

Technical indicators offer further insights into market sentiment. The Relative Strength Index (RSI) currently stands at 46, indicating a balanced momentum in the market, neither overbought nor oversold. Additionally, the 50-day Exponential Moving Average (EMA) at $1.08251 serves as a dynamic level of support or resistance, reinforcing the prevailing market trend.

Considering these factors collectively, the overall trend for EUR/USD leans towards bearish territory. Traders may find potential opportunities to initiate short positions below the pivot point of $1.08212, with a target take-profit level set at $1.07825. To manage risk effectively, a stop-loss order could be placed at $1.08399, allowing traders to limit potential losses in the event of adverse price movements..