As of Wednesday, the pair is trading near 1.0925 after experiencing a volatile session, with expectations of a more moderate week ahead.
Recent statistical data highlighted higher-than-expected inflation in the United States in February, prompting adjustments to predictions for the Federal Reserve's monetary policy easing in June.
The consumer price index (CPI) rose 0.4% month-on-month last month, in line with expectations. Year after year, the indicator expanded from 3.1% to 3.2%. Core inflation in the US rose 0.4% month-on-month, exceeding the forecast of 0.3%. Year over year, the indicator increased to 3.8% from 3.7% previously.
While these figures were not a “surprise,” they reaffirmed that inflation is more persistent than previously thought. The specific details of the reports offer local hopes for improvement, although overall it is clear that the situation could be more comfortable for the Federal Reserve to make important decisions.
The market interpreted this development favorably for the US dollar, changing investors' preferences towards it.
The market's attention is squarely on the Federal Reserve's June meeting, while the March and May sessions attract less interest. The Federal Reserve will likely require more statistical information by then.
As public data indicates, investor expectations suggest a 69% chance of a rate cut in June, up from 71% at the beginning of the week.
In what would be the most optimistic forecast, the Federal Reserve will probably manage to cut rates only three times this year.
EUR/USD technical analysis
On the H4 chart, EUR/USD is forming the first wave of decline towards 1.0777. The first structure of this wave and its correction have been completed. Today we will consider the probability of breaking the low of the first structure and continuing the development of the wave to the local target level of 1.0815. The MACD indicator confirms this scenario, with its signal line above zero and a sharply declining histogram, indicating the continuation of the bearish trend.
On the H1 chart, EUR/USD has formed the first wave of a descending structure to 1.0900 and a correction to 1.0939. Basically, the market has outlined a consolidation range around the 1.0939 level. Today a drop to the lower limit of this range is expected. With a break of 1.0900, a further decline to 1.0880 is anticipated, and the trend could continue to 1.0815. The stochastic oscillator confirms this scenario, with its signal line below 50, expecting a continuation of the fall towards 20.
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.
