FXEmpire.com –
Key Takeaways from the Week
- The EUR/USD faced a 0.08% decline, ending at $1.07743 for the week ending February 16.
- US inflation figures exceeded expectations, countering ECB’s warnings about premature interest rate cuts.
- Investor focus remains on central bank commentary, PMIs, inflation data, and forthcoming Fed and ECB monetary policy meeting minutes.
EUR/USD Performance in the Previous Week
During the week ending February 16, the EUR/USD stumbled by 0.08% to $1.07743. The currency pair saw a high of $1.08055 on Monday before dropping to a low of $1.06949 on Wednesday.
EUR/USD Analysis:
Coming up on Wednesday, Eurozone consumer confidence figures for February will capture investor attention. Any advancements in consumer confidence might signal a buoyant outlook for consumer spending, potentially prolonging the ECB’s plans for interest rate cuts.
Analysts project an increase in the Consumer Confidence Index from -16.1 to -15.6.
Thursday’s spotlight will be on preliminary private sector PMIs for France, Germany, and the Eurozone, with particular emphasis on the services sector, constituting over 60% of the Eurozone’s economy. Notably, the services sector plays a pivotal role in inflation. Beyond headline numbers, the prices sub-component will be closely monitored.
Forecasters anticipate a rise in the February Services PMI for the Eurozone from 48.4 to 48.7.
However, finalized Eurozone inflation numbers for January could also sway the ECB rate trajectory. An upward revision to preliminary figures may boost demand for the EUR/USD. Initial reports indicated a drop in the annual inflation rate from 2.9% to 2.8%.
Friday will see attention revert to the German economy. Finalized Q4 GDP and business sentiment figures will come into focus.
ECB Calendar
The ECB Monetary Policy Meeting Minutes will be a focal point on Thursday. A consensus to defer talks about interest cuts would bolster demand for the EUR. The results of the January ECB Consumer Expectations Survey could also influence market sentiment on Friday.
Additionally, ECB commentary, including speeches by President Christine Lagarde and executive board members, will carry significance.
US Economic Calendar
The release of FOMC Meeting Minutes will hold sway over short-term EUR/USD trends. Recent inflation figures diminished the likelihood of Fed interest rate cuts in March and May. The US dollar’s reaction to dovish tones will be indicative as expectations for a June rate cut intensify.
Thursday’s jobless claims and US private-sector PMIs will mold projections for the Fed’s interest rate path, especially the services sector’s weightage of over 70% in the US economy. Sub-components such as prices and employment will warrant careful consideration.
Analysts project a fall in the Services PMI from 52.5 to 52.0 in February.
Initial jobless claims are forecasted to rise from 212k to 217k in the week ending February 17.
Fed Speakers in Focus
Given the recent economic indicators, investors are advised to closely monitor speeches from FOMC members. The views of FOMC voting members will carry more weightage, shaping market sentiment on the timing of Fed rate cuts.
Short-Term Forecast:
The near-term EUR/USD trajectory hinges on the Services PMIs, Eurozone inflation, ECB and Fed minutes, and central bank commentary. Favorable Fed remarks and unforeseen service sector growth could tip the scales in favor of the US dollar.
EUR/USD Price Action
Daily Chart
The EUR/USD lingered below the 50-day and 200-day EMAs, signaling bearish price movements. A breakout from the $1.07838 resistance level and the 200-day EMA could usher in the 50-day EMA, paving the way toward the $1.09294 resistance level.
However, a plunge beneath the $1.07000 handle would bring the $1.06342 support level into sight. Currently, the 14-period Daily RSI at 43.81 forecasts a potential downturn to the $1.06342 support level before entering oversold territory.
4-Hour Chart
The EUR/USD remains above the 50-day EMA but below the 200-day EMA, projecting mixed short-term and longer-term price signals. Broaching the $1.07838 resistance level would bring the 200-day EMA and the $1.09294 resistance level into play.
Conversely, a breach of the 50-day EMA would pave the way for a descent toward the $1.06342 support level. Presently, the 14-period 4-Hourly RSI at 57.09 suggests a potential move to the $1.09294 resistance level before entering overbought territory.
EURUSD 180224 Daily Chart
EURUSD 180224 4-Hourly Chart
This article was originally posted on FX Empire
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