EUR/USD Takes a Breather as Prices Test Support

Euro Dollar (EUR/USD) Talking Points:

• EUR/USD is holding onto the 50-day moving average (MA) as prices struggle to break free from a broader range of support and resistance.
• The Euro fell after failing to breach above 1.090
• The US dollar remains weak, which is dampening growth expectations and increasing the possibility of a recession.

The EUR/USD has been on a sharp upward trend since September 2022, driven by European Central Bank (ECB) optimism and dollar weakness. While the Fed has aggressively raised interest rates throughout the past year, market participants were expecting the pace of tightening or pivot to slow in the near term.

Since the European Central Bank (ECB) remains committed to raising interest rates until inflation shows significant signs of abating, higher rates contributed to the recent move. With the hawkish comments expressed by Fed Chair Jerome Powell at last month’s summit, the repricing of interest rate expectations boosted demand for the greenback. However, after falling to the previous support at 1.0524 on March 8, the collapse of SVB (Silicon Valley Bank) and Signature Bank raised concerns about the health of the US banking system.

EUR/USD price analysis

After rising above trend line resistance (taken from the 2021 high) in January, dollar weakness and a hawkish European Central Bank (ECB) allowed the euro to rally against the greenback. With EUR/USD rallying to the 50% Fibonacci retracement (mid point) of the 2021 – 2022 move, prices continued to climb before hitting the February high of 1.103. This was followed by a sharp decline which retested EUR/USD support at March low of 1.0523 before heading higher.

While a combined range of technical support and resistance is forming between the March low and the 50-day moving average (1.073) on Wednesday, the FOMC meeting allowed prices to enjoy an additional boost of confidence.

EUR/USD daily chart

Chart created by Tammy DaCosta Using TradingView

With the bulls failing to gain traction above 1,090, the 50-day moving average is back in play and continues to provide support for the short- and long-term move.

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With fundamentals remaining at the forefront of risk sentiment, the economic docket highlights high-impact data releases that could contribute to driving volatility and price action next week.

DailyFX Economic Calendar

– By Tammy Da Costa, Analyst for DailyFX.com

Connect with Tammy and follow her on Twitter: @Tams707