Key Points:
Overall Bias: Bearish in the short term, with potential to test lower support levels.
Main Driver: Dollar strength supported by expectations of US interest rates remaining high for longer.
Decisive Level: Breaking the 1.1550 level could open the door for further decline toward 1.1443.
Fundamental Analysis
EUR/USD is facing clear selling pressure, driven by the strength of the US dollar. This positive momentum for the dollar is supported by market expectations of continued tight monetary policy from the Federal Reserve, especially after recent economic data showed a noticeable rise in import costs. In February, import costs jumped by 1.3% – the largest increase in four years.
This outlook has been reinforced by hawkish statements from Fed members. For example, Michael Barr warned that interest rates may need to remain stable for a long period, pointing out that inflation is still above the 2% target and labor market stability supports keeping current policies unchanged. In the same context, Austan Goolsbee noted that geopolitical tensions in the Middle East complicate the Fed’s task, affirming that expecting a rate cut before seeing a sustained decline in inflation is unrealistic.
Looking ahead, markets are awaiting Wednesday’s US crude oil inventory data, which affects energy prices and thus inflation expectations. On Thursday, attention will turn to US jobless claims data – expected to record 211,000 – which could provide further signals on labor market health.
Technical Analysis
Fundamental analysis supporting the dollar aligns with the negative technical signals for EUR/USD. At the start of Wednesday’s trading, price action showed weak buying momentum after prices failed to achieve a clear breakout above the key resistance level at 1.1627. This pullback suggests a potential shift in the short-term bullish market structure.
Bearish Scenario: As long as the price remains below the daily resistance at 1.1587, selling pressure (fundamentally supported by dollar strength) may push the pair to test the first support at 1.1550. If this level is broken and the daily close is below it, the decline could extend to the next support at 1.1443.
Bullish Scenario: On the other hand, the price needs to return and close back above the main resistance at 1.1627 to invalidate the current negative outlook. Achieving this breakout would revive positive momentum and push prices to resume their upward path, despite fundamental challenges.
Monitoring Levels
Daily Support Levels:
First level: 1.1550
Second level: 1.1443
Daily Resistance Levels:
First level: 1.1587
Second level: 1.1627
Daily Pivot Level: 1.1627
(Numeric sequence from original chart: 1.16600, 1.16400, 1.16271, 1.16200, 1.16000, 1.15871, 1.15843, 1.15600, 1.15605, 1.15400, 1.15200, 1.15000, 1.14800, 1.14600, 1.14430, 1.14200, 1.14000, 80.00, 60.00, 40.00, 20.00, 0.00, 12:00 17, 12:00 18, 12:00 19, 12:00 20 22, 12:00 24, 12:00 25, 12:00 26, 12:00 27)
Disclaimer: This analysis is provided for educational purposes only and does not constitute investment advice. Trading in financial markets involves high risk.