Eurusd drops amid consolidation as US rate projections shift and euro area inflation eases

EURUSD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	-0.07%	-8.2 Pips
Week to-date	0.57%	61.5 Pips
March	5.43%	563.3 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In the United States, there is a notable shift seen in the interest rate projections as reported by the Federal Reserve. For the first year, projections have decreased from 3.9% to 3.4%, and for the second year, they are now at 3.1% down from 3.4%. Over the longer term, rates are projected to remain steady at 3%, consistent with previous estimates. Crucially, the Federal Funds Rate remains unchanged at 4.5%. The broader trend suggests a dovish approach by the Federal Reserve, focusing on stabilizing economic growth as rates are being lowered progressively in the short and mid-term outlook compared to earlier intentions.

In the Euro Area, the latest figures from Eurostat highlight a modest decline in consumer price indices. The Harmonized Index of Consumer Prices (HICP) in February dropped to 0.4%, marking a slight decrease from January’s 0.5%. Furthermore, the Core HICP, which excludes volatile items, also edged downward to 0.5% from 0.6% in January. However, the Core HICP for February remains unchanged at 2.6%, reflecting some stability in the longer-term inflation measure. These numbers indicate that inflationary pressures within the Euro Area are easing slightly, which may guide the European Central Bank’s future monetary policy with respect to inflation management.

Considering the EURUSD exchange rate in the context of these economic indicators, we note a slight decline of 0.07%, bringing the pair to 1.09360. This movement hints at market reactions that consider the slow decrease in U.S. rate projections contrasted with stabilizing prices in Europe. With the Fed indicating less aggressive future rate hikes, it might imply reduced demand for the USD as an asset yielding higher returns. Meanwhile, the slight easing of inflation in the Euro Area might not sufficiently bolster the euro. This combination of factors leaves the EURUSD pair in a consolidative pattern. With no significant events scheduled to alter these dynamics immediately, the pair may continue to fluctuate within this range in the short term.

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What can we expect from EURUSD today?

EURUSD on Wednesday dropped -0.07% to 1.09360. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for EURUSD looks mixed as the pair is likely to consolidate above 1.0931 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 1.09460 or trades above daily pivot 1.09385. Break above could target R1 at 1.09435. While to the downside, we are looking at 1.0931 (S1) and daily low of 1.09335 as support levels. EURUSD need to break on either side to indicate a short-term bias. A close below 1.09335 would indicate selling pressure.

For the week to-date, take note that EURUSD is mixed as compared to the prior week.

Key levels to watch out:

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