EUR/USD trades lower within a new range in the 1.0800s following warmer-than-expected US inflation data, suggesting the Federal Reserve (Fed) may need to maintain higher interest rates for longer.
Key Factors:
- Fading Rate Cut Expectations: The reduced probability of an early Fed pivot weighs on EUR/USD. Market expectations increasingly favor rate cuts starting in July rather than June.
- Eurozone Data: In-line inflation and positive trade figures provide limited support to the Euro.
- Focus on Fed: Wednesday’s Fed decision and updated Summary of Economic Projections (SEP) will be crucial for determining the rate outlook.
Technical Outlook:
- Correction Continues: EUR/USD retreats from the March 8 high, questioning the sustainability of the short-term uptrend.
- Key Support: The 1.0867 level remains a critical inflection point. A break below could signal a trend reversal, targeting 1.0795 support.
- Uptrend Continuation: Holding above 1.0867 and breaking above 1.0981 would confirm the uptrend’s strength, potentially aiming for the 1.1000 psychological resistance.
