- Traders cut the odds of the Fed cutting rates in March from 89% a month ago to 48%.
- Discussions among ECB policymakers on Monday revealed disagreements over the timing of interest rate cuts.
- Traders are fully pricing in an April ECB rate cut.
Tuesday’s EUR/USD price analysis revealed bearish sentiment as investors braced for the possibility that the Fed could reject expectations of an early rate cut. The Fed will wrap up its policy meeting on Wednesday.
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Notably, the probability that the Fed will cut rates in March fell from 89% a month ago to 48% as the US economy remained robust. Conversely, there is a less favorable economic outlook for European countries, which makes the euro less attractive.
Helen Given, foreign exchange trader at Moneck USA in Washington, noted: “The macro picture in the US looks much better than the macro picture in European Union countries and the Eurozone in general.”
Tomorrow, investors will be closely watching Fed Chairman Jerome Powell’s comments. Powell hinted in December that the Fed was moving toward a rate-cutting cycle. Meanwhile, the ECB kept interest rates at a record 4 percent on Thursday, underscoring its commitment to fighting inflation. Discussions among ECB policymakers on Monday revealed disagreements over the timing of a potential rate cut.
ECB policymaker Peter Casimir expressed in a blog post: “The next move will be a cut, and it is within our reach. He emphasized that the precise timing, whether in April or June, is less important. Meanwhile, Mario Centeno, the governor of Portugal’s central bank, favored earlier action, saying it would allow the ECB to gradually implement changes. Traders are now fully pricing in the move in April.
EUR/USD key events today
- US CB Consumer Confidence Report
- US Job Openings Report JOLTS
EUR/USD price technical analysis: Price reaches key support at 1.0800
On the charts, the pair finally touched the support level of 1.0800. However, the decline from the key resistance level of 1.0900 was slow and shallow, indicating that the bears have weakened. Furthermore, weakness can be seen in the RSI, which has made more lows as the price falls.
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So there is a bullish divergence that could lead to a trend reversal. For the bulls to take over, the price must break above the 30-SMA and 1.0900 to start making higher highs and lows. However, if the bearish bias continues, the price could break below the 1.0800 support.
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