EURUSD: Powell on Inflation - Cut in Sight?
This week, Federal Reserve Chairman Jerome Powell is expected to reiterate his intention to correct inflation through interest rate adjustments, with the 2% target set at the last FOMC meeting in January. Although the U.S. economy remains robust, inflation has declined in recent months, but not enough to warrant a sustainable return to the Fed's annual target and inspire sufficient market confidence. The resilience of the U.S. economy provides room to expect further signs of inflationary easing, possibly allowing for a mid-year monetary policy cut, as indicated by many analysts the Fed is already being tight enough and the CME's FedWatch tool, which forecasts a 25 basis point cut.
It will be crucial to monitor this Friday's U.S. Non-Farm Payrolls data to assess whether growth has slowed as expected or whether the Fed should stop feeling comfortable as it is. Interest rates have been at more than 20-year highs since July 2023, which has played a role in cooling the labor market and inflation simultaneously. However, January data showed that the labor market is holding up despite persistent inflation above 2%.
As for the euro zone, important data is expected this week, including unemployment in Spain and key data such as industrial production and bond auctions in several countries. In addition, German trade balance and Eurozone unemployment and growth rates will be highlighted.
From a technical perspective, a slightly bearish sideways range has been observed since February 24, reflecting the euro's weakness against the dollar that appears to be continuing. The volume indicator shows a bearish trend, with a checkpoint at $1.08437. The recently initiated upward momentum is likely to slow around $1.08707 and may reverse with a possible ceiling at $1.07999. The RSI is slightly overbought, but without significant volumes at 56.31%. The triple top and triple bottom patterns of previous weeks suggest that the Euro is likely to remain sideways in the short term marking this strong range, keeping the Euro in an undervalued zone.
It will be crucial to monitor this Friday's U.S. Non-Farm Payrolls data to assess whether growth has slowed as expected or whether the Fed should stop feeling comfortable as it is. Interest rates have been at more than 20-year highs since July 2023, which has played a role in cooling the labor market and inflation simultaneously. However, January data showed that the labor market is holding up despite persistent inflation above 2%.
As for the euro zone, important data is expected this week, including unemployment in Spain and key data such as industrial production and bond auctions in several countries. In addition, German trade balance and Eurozone unemployment and growth rates will be highlighted.
From a technical perspective, a slightly bearish sideways range has been observed since February 24, reflecting the euro's weakness against the dollar that appears to be continuing. The volume indicator shows a bearish trend, with a checkpoint at $1.08437. The recently initiated upward momentum is likely to slow around $1.08707 and may reverse with a possible ceiling at $1.07999. The RSI is slightly overbought, but without significant volumes at 56.31%. The triple top and triple bottom patterns of previous weeks suggest that the Euro is likely to remain sideways in the short term marking this strong range, keeping the Euro in an undervalued zone.
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