The EUR/USD pair struggled to capitalize on a modest recovery from this week’s multi-month lows, as bets on an ECB rate cut in April limited the shared currency’s upside. Despite USD’s limited price action, the pair faced resistance near the 100-day simple moving average (SMA) and faced selling pressure near the 1.0800 mark on Friday.
While recent dovish comments from ECB officials and muted USD movement in the open helped limit downside risks, uncertainty remained as traders sought clarity on the timing and pace of potential Fed interest rate cuts in 2024. Focus has shifted to the upcoming US consumer inflation data, which will influence the Fed’s policy decision and subsequently sentiment around the US dollar and the Euro/USD pair.
European Central Bank officials’ efforts to manage market expectations regarding early interest rate cuts aimed to support the EUR/USD pair amid subdued US Dollar demand. Comments from ECB members emphasized the importance of waiting for more wage data before considering rate cuts and highlighted the need for patience due to potential inflationary pressures. Although the ECB’s economic bulletin suggested a gloomy outlook for the Eurozone economy, expectations for rate cuts in the second quarter increased, restraining aggressive bullish bets on the euro. Meanwhile, US labor market data indicated resilience, reinforcing expectations of prolonged higher rates by the Federal Reserve, which failed to provide significant momentum to the USD.
From a technical perspective, the EUR/USD pair faced resistance near the 100-day SMA and the 1.0800 mark, favoring bearish traders. Any further upward movement was likely to encounter supply near the 200-day SMA and a descending trend-line, with a breach potentially shifting the bias in favor of bullish traders. Conversely, immediate support levels around the overnight swing low and multi-month lows protected the downside, with a decisive break below indicating vulnerability and potential further declines.
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The European Central Bank (ECB) influences the Euro by setting interest rates and managing monetary policy for the Eurozone. Maintaining price stability, primarily by keeping inflation around 2%, is its primary mandate. Monetary policy decisions are made by the Governing Council, which meets eight times a year and comprises heads of Eurozone national banks and six permanent members, including the ECB President.
Today’s Euro price movement against major currencies is displayed in the table below. The Euro demonstrated its strength particularly against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | +0.05% | +0.06% | -0.01% | -0.16% | +0.07% | -0.63% | +0.22% | |
| EUR | -0.05% | +0.00% | -0.07% | -0.23% | +0.02% | -0.69% | +0.17% | |
| GBP | -0.06% | +0.00% | -0.06% | -0.22% | +0.01% | -0.69% | +0.17% | |
| CAD | +0.01% | +0.06% | +0.07% | -0.16% | +0.07% | -0.62% | +0.23% | |
| AUD | +0.17% | +0.22% | +0.22% | +0.15% | +0.23% | -0.47% | +0.39% | |
| JPY | -0.07% | -0.02% | -0.02% | -0.09% | -0.26% | -0.67% | +0.17% | |
| NZD | +0.63% | +0.68% | +0.68% | +0.61% | +0.45% | +0.69% | +0.84% | |
| CHF | -0.22% | -0.17% | -0.16% | -0.23% | -0.38% | -0.15% | -0.85% |
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Quantitative Easing (QE) is a policy tool used by the ECB in extreme situations to inject liquidity into the economy by purchasing assets, resulting in a weaker Euro. Quantitative Tightening (QT) is the reverse process, undertaken during economic recovery to reduce liquidity, usually strengthening the Euro.
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