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Mar 18
2024

EUR/USD trades sideways below 1.0900 amid quiet markets

EUR/USD is keeping its range play intact below 1.0900 in early European trading on Monday. The pair lacks a clear directional bias, amid a steady US Dollar and an upbeat risk mood, awaiting fresh catalysts for trading impetus. 

Technical Overview

EUR/USD broke below the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart dropped below 40, highlighting a buildup of bearish pressure.

On the downside, a strong support area seems to have formed at 1.0870-1.0860, where the 100-period Simple Moving Average (SMA) meets the Fibonacci 38.2% retracement level of the latest uptrend. If the pair falls below that level and starts using it as resistance, 1.0830 (200-period SMA, Fibonacci 50% retracement) could be seen as the next bearish target before 1.0800 (Fibonacci 61.8% retracement).

1.0900 (lower limit of the ascending channel) aligns as key resistance. In case the pair manages to stabilize above that level, sellers could be discouraged. In this scenario, 1.0920 (20-period SMA, 50-period SMA) could act as interim resistance before 1.0950 (mid-point of the ascending channel).

 

Fundamental Overview

EUR/USD came under heavy bearish pressure and closed below 1.0900 on Thursday. The pair stays relatively calm but struggles to gather recovery momentum early Friday.

After the data from the US showed that producer inflation, as measured by the change in the Producer Price Index (PPI), climbed to 1.6% on a yearly basis in February from 1% in January, the benchmark 10-year US Treasury bond yield surged higher and provided a boost to the US Dollar (USD). According to the CME FedWatch Tool, the probability of the Federal Reserve leaving the policy rate unchanged at June meeting climbed to 40% after the PPI data, compared to nearly 25% earlier in the week.

Later in the day, the US economic docket will feature Import Price Index and Export Price Index figures for February. Although these data usually don't trigger a noticeable market reaction, a positive reading in the Import Price Index, which was down 1.3% on a yearly basis in January, could help the USD preserve its strength heading into the weekend.

The University of Michigan (UoM) will release the preliminary Consumer Sentiment Survey for March as well on Friday. The Consumer Confidence Index is forecast to remain unchanged at 76.9. Investors will also pay close attention to the one-year and five-year inflation expectation components of the survey.

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