The pair rose to 1.0844 on Thursday, marking an unexpected turnaround following a period of strong US dollar performance. This shift in dynamics can be attributed to investors' positive response to US Federal Reserve Chairman Jerome Powell's comments on the future of interest rates. Powell's comments sparked an increase in risk appetite, causing the dollar to fall.
Powell indicated that economic indicators would greatly influence the Federal Reserve's decisions on interest rate adjustments. Traders interpreted his comments as a suggestion that, given the recent modest nature of US economic data, the early forecast of three rate cuts in 2024, starting in June, remains on the table. The expectation is that the Federal Reserve will reduce interest rates by 75 basis points by the end of the year, which is consistent with previous statements by the Federal Reserve. This hinted at a majority consensus among monetary policy committee members to begin cutting rates within the year, depending on economic data.
Powell's reaffirmation of the Federal Reserve's path toward lower interest rates, with a specific timetable depending on upcoming data, sets the stage for March's U.S. labor market reports, which will be closely watched. The focus will be on whether the unemployment rate has remained stable and whether there has been any slowdown in average wage growth.
EUR/USD technical analysis
On the H4 chart, the EUR/USD pair has completed a correction to 1.0783, with a tight consolidation range now established around this level. A bullish breakout from this range could lead to a continuation of the correction to 1.0847, potentially followed by a new bearish wave to 1.0694. This scenario is supported by the MACD indicator, where the signal line is below zero and the histogram peaks, suggesting a possible sharp decline.
The H1 chart reveals a corrective pattern towards 1.0847, with an expected move towards 1.0783 to begin a downward phase. A new range consolidation at these levels could trigger a further correction to 1.0888 or a downside wave to 1.0694 in case of a breakout. The stochastic oscillator, positioned above 80, anticipates a significant drop to the 50 mark, which could lead to further declines.
By RoboForex Analysis Department
Disclaimer
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
