ECB & Fed on Watch
The recovery in EURUSD has stalled today into a retest of the broken 1.0515 support level. A rebound in USD, linked to more aggressive tariff rhetoric from Trump has fuelled a weakening of the pair through the European morning on Tuesday. Looking ahead this week, expectations of a fresh rate cut from the ECB alongside the Fed holding rates steady, mean that EURUSD is vulnerable to a deeper push lower depending on the guidance from both banks.
Bearish EURUSD Scenario
If the ECB cuts and strikes a dovish tone, signalling further easing is likely, EURUSD is likely to drop down again. This dynamic will be reinforced if the Fed takes a more hawkish tone on Wednesday, pushing back against rate cut expectations in coming months. In this scenario, clear divergence between the ECB and Fed should see EURUSD moving lower through the end of the week.
Bullish EURUSD Scenario
However, if the ECB strikes a less dovish tone and sounds more neutral on rates, reiterating a data dependant stance, and the Fed takes a more dovish tone, this could pave the way for a recovery rally in EURUSD. We’ve seen a dovish shift recently in the market’s Fed rates pricing for March and May. If rate cut pricing moves higher on the back of the FOMC, USD is likely to soften near-term. The extent of any decline will be firmly influenced by Trump’s tariff actions, however.
Technical Views
EURUSD
The rally in EURUSD has stalled for now into a test of the 1.0515 level. With momentum studies bullish, bulls are looking for a break above this level to put focus back on a move up to 1.0724 next. While the level holds, however, 1.0365 is next support to note ahead of YTD lows.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.