Market Overview

EUR/USD Forecast: Can The ECB Hike Talk Save It From A Fourth Down-day?

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  • EUR/USD is trading slightly higher on a report that the ECB is talking about the path of hikes.
  • The Fed decision on Wednesday looms large and tensions are mounting.
  • The technical picture remains mixed with the pair struggling around the 50-day SMA. 

The EUR/USD is trading slightly higher on the day, slightly above the $1.2300 handle. The Euro managed to recover on a report that the European Central Bank is discussing the path of rate hikes and the steepness of that path. In addition, the ECB sources are comfortable with current market expectations for a rate hike in Q2 2019. The mere talk of a raising rates in the euro-zone, where the ECB is still buying bonds at a rate of €30 billion per month, is a bullish sign.

In addition, the pair enjoys the news of a transition deal between the EU and the UK. While the Iriish question remains open, the significant progress that has been announced is a positive not only for Sterling but also for the Euro. Nevertheless, after both these factors sent the EUR-USD to $1.2325, it fell closer to $1.2300.

Earlier, the pair continued to gradually lose ground in slow moves. With no significant economic releases today, the tension toward the Fed decision on Wednesday is the main driver.

Fed Chair Jerome Powell is expected to oversee a rate hike in his first decision as Fed Chair. Markets are wondering whether the central banks will raise rates three or four times this year. The current dot-plot points to three hikes in 2018 but Powell hinted of a possible upgrade to four. The press conference, Powell\s first as well, will be of high interest. 

The message may differ between the presser and the documents. See the full preview here.

Over the weekend, US President Donald Trump criticized the Special Counsel Robert Mueller and his team. The investigation into Russia's interference with the elections has reportedly sought documents from the Trump Organization, a "red line" for the President. Political worries around the Administration with recent personnel changes and trade tariffs worry markets.

In the euro-zone, leaders prepare for the EU Summit on Thursday but this may have an impact on the Pound rather than the Euro, as Brexit is at the center of attention. Flash PMI data from Markit will be of higher interest amid fears that euro-zone growth has peaked. 

EUR/USD Technical Analysis - Struggling with the 50-day SMA

The EUR/USD is trading in a narrow range but the bears are mounting. The pair is trading around the 50-day Moving Average which comes out at $1.2310. Moreover, the RSI is slightly below the 50-point threshold. Momentum is somewhat positive so the bears are not in full control.

Support is found at $1.2260 which suported the pair both today and on Friday. Below, the $1.2205 level is next, followed by $1.2155, both recent lows.

Looking up, $1.2360, which capped the pair in recent weeks, is the next line of resistance. $1.2412 that held the pair down last week is the next cap, followed by the March 8th high of $1.2447.

eur_usd_56-636570625408226109.png

 

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Posted-In: FXStreetNews Eurozone Forex Markets

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