The Euro-Dollar exchange rate is toying with 1.1300, keeping the lower ground with a respite in the slide of the US Dollar across the board.
Treasury rates in the United States are on the defensive as speculators await the Fed’s conclusion to see how aggressive Jerome Powell and his colleagues have turned out to be.
Given the different fiscal policy outlooks of the Federal Reserve and the European Central Bank, bulls are anticipated to remain on the sidelines even as the FOMC is generally expected to indicate an interest-rate rise in March on Wednesday.
In the face of confusing German IFO data and lackluster remarks from ECB Chief Economist Phillip Lane, the major currency pair mounted a respectable rebound on Tuesday, albeit it ended the day in the negative zone.
Evaluation Of The Technical Aspects
EUR/USD CHART Source: Tradingview.com
On the daily chart of the EUR/USD, the price tests the ascending trendline support that has been in place for two months and is aligned at 1.1295.
Every day that closes below the latter will ignite a new downswing towards 1.1250. Before that, the low of 1.1263 set on Tuesday will be put to the test.
While the 14-day Relative Strength Index (RSI) is still below the midline, it moves lower, indicating that the negative bias is still in place.
Returning to support turned opposition around 1.1315, the 50-day moving average (DMA), which is key to igniting a further comeback in the market.
The horizontal 21-day moving average (DMA) around 1.1345 is expected to be the next key resistance. Investors will aim to take out the round level of 1.1400 in the coming weeks.
Insights On The Big Picture
When it comes to statistics, stronger German and Eurozone IFO numbers followed dismal US CB Consumer Sentiment and Richmond Fed Manufacturing Index values to help raise the EUR/USD pair the previous day, according to the European Central Bank.
As measured by the 10-year book value rate of inflation as reported by the St. Louis Federal Reserve (FRED) statistics, positive US inflation expectations helped sellers maintain control in the aftermath.
On the flip side, the denial of Omicron-linked inflation worries by the European Central Bank (ECB) Senior Economist Philip Lane has had a negative impact on the EUR/USD exchange rate.
The policymaker stated in his statement that “the coronavirus Omicron strain is not proving to be a component that will have an impact on the levels of activity for the year.”
Looking ahead, second-tier US statistics on housing and commerce may provide some pleasure for EUR/USD speculators. The markets also anticipate Fed Chair Jerome Powell’s announcement in hopes of gaining insight into the timing of a rate hike in March or the beginning of the Fed’s balance sheet normalization process.
It should be noted that the Fed’s tapering program is now in progress, and the possibility of completing it in February might be interpreted as a negative development for the EUR/USD.