On Wednesday, EUR/USD maintained its position in the 1.0850s, showing minimal movement from the previous day’s close, as market participants brace themselves for the release of crucial macroeconomic data from the US. The eagerly anticipated Consumer Price Index (CPI) for March is slated for release at the onset of the US session.
Anticipation Surrounding CPI Data
Traders eye the CPI data with keen interest, anticipating potential shifts in market dynamics based on the extent to which the figures deviate from expectations. Economists’ projections suggest a 3.4% Year-over-Year increase in US prices for March, with core goods, excluding volatile food and energy prices, expected to rise by 3.7% YoY.
Should the results align with forecasts, it would signal an inflation rate well above the Federal Reserve’s target of 2.0%. A substantial deviation from expectations would be necessary before the Fed considers adjusting interest rates from the current level of 5.5%.
Contrasting Monetary Policy Outlooks
In contrast, the European Central Bank (ECB) is perceived as more inclined to implement interest rate cuts sooner, given subdued growth and inflation prospects within the Eurozone. The prospect of relatively higher interest rates in the US compared to the Eurozone acts as a bearish factor for EUR/USD, attracting foreign capital inflows and bolstering the US Dollar.
Impending ECB Meeting Adds to Uncertainty
Further volatility awaits EUR/USD as the European Central Bank (ECB) convenes for its April policy meeting on Thursday. While some ECB members, including François Villeroy de Galhau, President of the Banque de France, have hinted at the possibility of an interest rate cut in April, the majority view April as premature due to the absence of the latest wage data.
Technical Analysis Highlights Range-bound Movement
From a technical perspective, EUR/USD appears ensnared within the confines of three significant Simple Moving Averages (SMA) on the 4-hour short-term chart. The 50-day and 200-day SMAs provide support levels at 1.0830 and 1.0831, respectively, while the 100-day SMA acts as a resistance point at 1.0873.
As EUR/USD navigates through economic uncertainties and awaits pivotal data releases, market participants remain vigilant, poised to respond swiftly to developments that could potentially shape the currency pair’s trajectory in the near term.
