- Powell was more confident that the Fed will cut interest rates this year.
- The ECB kept interest rates on hold on Thursday and prepared for its first rate cut in June.
- There is a widening gap in inflation and growth prospects between the Eurozone and the US.
The EUR/USD outlook looks strongly bullish, boosted by the recent decline in the dollar ahead of the eagerly awaited non-farm payrolls report. Notably, the dollar extended its decline, building on momentum from the previous session, as investors gained confidence in the likelihood of a Fed rate cut later this year.
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On Thursday, Powell was more confident that the Fed will cut interest rates this year. His remarks sent Treasury yields lower and the dollar lower, allowing the euro to hit new highs.
In addition, data from the US revealed that initial jobless claims held steady last week, while continuous claims rose. Investors are bracing for the all-important non-farm payrolls report, which will provide clues on the Fed’s next move. Economists expect slower job growth in February, which could boost EUR/USD.
Meanwhile, the European Central Bank kept interest rates on hold on Thursday and prepared for its first interest rate cut in June. In particular, the central bank cut its forecasts for inflation and growth, signaling a looming rate cut. Although EUR/USD rallied on Thursday, the outlook for the pair is bleak. There is a widening gap in inflation and growth prospects between the Eurozone and the US.
In the US, the economy remains resilient and inflation is persistent. Meanwhile, inflation in the Eurozone is falling and growth is slowing. Accordingly, interest rates in the Eurozone could fall earlier and faster than in the US, which would be falling for EUR/USD.
EUR/USD key events today
- Average hourly earnings in the US m/m
- Change in non-farm employment in the US
- Unemployment rate in the US
EUR/USD Technical Outlook: Bullish momentum is peaking near the significant barrier of 1.0950
On the technical side, EUR/USD made new highs near the key resistance level of 1.0950. Moreover, the price hit the resistance of the bullish channel, supporting a solid bullish bias. Initially, the price was stuck consolidating below the key 1.0850 level.
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However, the bullish momentum picked up when the price broke above the level. Accordingly, it rose well above the 30-SMA, while the RSI rose to overbought territory.
However, the price could temporarily pull back to retest the SMA as it faces a strong barrier. There is resistance at the key level of 1.0950 and the resistance line of the channel.
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