The Euro has experienced a sharp decline over the past two days, reaching five-month lows near 1.0600. A hawkish Federal Reserve stance combined with a dovish European Central Bank (ECB) has fueled the EUR/USD selloff, with the pair facing its worst weekly performance in over a year.
ECB Signals Rate Cut Potential, Contrast with Fed
The ECB’s decision to leave rates unchanged at 4% was not unanimous. Dovish comments in the policy statement and dissent among policymakers have ignited expectations for an upcoming rate cut, potentially as early as June. This places the ECB in a uniquely dovish position compared to the Federal Reserve.
Recent strong US inflation and economic data are forcing the Fed to reassess its plans for monetary easing. This sharp policy divergence puts downward pressure on EUR/USD.
Outlook: Limited Upside Potential, Oversold Conditions Could Trigger Bounce
Further downside for EUR/USD remains likely. While oversold conditions on intraday charts could trigger some technical bounce, upside attempts will likely be capped.
Key Support Levels:
- 1.0630
- 1.0525
Resistance Levels:
- 1.0725
- 1.0755
