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- EUR\/USD pierces below the\u00a0key 200-day SMA on Friday after Bundesbank’s\u00a0Nagel raises prospect of an early interest-rate cut.\u00a0<\/strong><\/li>\n
- The pair comes off its lows in the last hour, however, supported by positive German IFO Business Sentiment data.\u00a0<\/strong><\/li>\n
- EUR\/USD is poised to extend breaks below key support levels as key central bank figures line up to speak.\u00a0<\/strong><\/li>\n<\/ul>\n
EUR\/USD is trading<\/a>\u00a0down almost half a percent\u00a0on Friday, in the lower 1.0800s, below the 200-day Simple Moving Average (SMA), after comments from the President of the Bundesbank Joachim Nagel, suggested the European Central Bank (ECB)<\/a> could be in a position to cut rates before the summer recess.<\/p>\n
The pair continues to paint\u00a0trader’s screens red, and even positive German IFO data \u2013 which hit a 9-month high \u2013\u00a0only managed\u00a0to administer a “band aid” temporary bounce after its release.\u00a0<\/p>\n
EUR\/USD bleeds lower on Nagel statement\u00a0<\/h2>\n
EUR\/USD was delivered a body blow on Friday during the European session after President of the Bundesbank, Joachim Nagel said he foresaw the ECB potentially\u00a0 cutting interest rates before the summer recess, which was interpreted as meaning most likely in June.\u00a0<\/p>\n
“If I would put it into probabilities, definitely something in June has a higher probability than in April.” Said Nagel, according to Reuters.\u00a0<\/p>\n
Markets forecast 89 basis points of rate cuts, or at least three but possibly four 25 basis-point moves, with the first coming in June or July.<\/p>\n
The Bundesbank President stressed an initial cut would\u00a0not imply subsequent moves. The ECB would make decisions on a\u00a0meeting by meeting basis as fresh data became available.<\/p>\n
His most recent comments suggested he is concerned about \u201cEurope\u2019s growth prospects more than his homeland\u201d and back in February, he said the governing council should wait for Q2 wage data before deciding on whether to cut interest rates or not.\u00a0<\/p>\n
Nagel was speaking at\u00a0a webcast on “monetary policy challenges and the economic outlook<\/a> for the Eurozone<\/a> and Germany,\u201d according to the economic calendar<\/a>.\u00a0<\/p>\n
EUR\/USD comes off lows after German IFO data hits 9-month high<\/h2>\n
EUR\/USD managed to stem its bleed lower on Friday, but only temporarily after strong German sentiment data<\/a> improved the outlook for the country.<\/p>\n
The headline German IFO Business Climate Index arrived at 87.8 in March, higher than the February reading of 85.5, much above the market\u00a0consensus\u00a0of 86.0.<\/p>\n
Meanwhile, the Current Economic Assessment Index rose from 86.9 in February to 88.1 in the reported month, beating expectations of 86.8.<\/p>\n
The IFO Expectations Index \u2013 indicating firms\u2019 projections for the next six months, edged higher to 87.5 in March vs. 84.1 recorded in the previous month while surpassing the expected 84.7 figure.<\/p>\n
EUR\/USD bounced off the 1.0808 session lows after the release of the data, but only recouped losses marginally.\u00a0<\/p>\n
EUR\/USD: A day of doves and hawks<\/h2>\n
The key drivers for the pair at the end of the week will probably be commentary from central bankers.\u00a0<\/p>\n
Their comments could impact the outlook for interest rates, which are set by central banks. Interest rates impact currencies because they dictate the level of foreign capital inflows from investors searching for returns. When interest rates are expected to go up it is positive for a currency; when down negative. Currently, the debate hinges around the timing of future rate cuts, with the consensus being that both the ECB and the Fed will make cuts in June. Anything that deviates from that view could cause volatility<\/a>.\u00a0\u00a0<\/p>\n
At 16:00 GMT, Federal Reserve Vice-Chair for Supervision Michael Barr will participate in a virtual discussion titled “International Economic and Monetary Design”.<\/p>\n
At 17:00 GMT , ECB Chief Economist and Board Member Philip Lane will deliver a policy lecture on inflation and monetary policy at the Aix-Marseille School of Economics (AMSE).\u00a0<\/p>\n
At 20:00 GMT, Federal Reserve Bank of Atlanta President Raphael Bostic<\/a> will moderate a conversation about household finances at the 2024 Household Finance Conference \u2013 there is an outside chance he could mention interest rates<\/a>.\u00a0<\/p>\n
Technical Analysis: EUR\/USD tests trendline and 200-day SMA<\/h2>\n
EUR\/USD<\/a> is making volatile switches inside the 1.0800s and 1.0900s. It is currently trading back down in the 1.0800s just below the 200-day SMA at 1.0839, and a major trendline.\u00a0<\/p>\n
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Euro versus US Dollar: Daily chart<\/small><\/p>\n
The pair appears to be threatening to break below the trendline which could usher in a more bearish phase.\u00a0<\/p>\n
Such a move would be likely to tumble to at least 1.0775, the 0.618 Fibonacci extension of the move prior to the breakout lower, a common method of forecasting targets for trendline breaks.\u00a0<\/p>\n
The move down lacks momentum, however, as evidenced by the Relative Strength Index (RSI) on the 4-hour chart<\/a> below, which shows RSI failing to reflect price\u2019s current move down to a lower low \u2013 a suggestion bearish conviction is lacking.\u00a0<\/p>\n
- The pair comes off its lows in the last hour, however, supported by positive German IFO Business Sentiment data.\u00a0<\/strong><\/li>\n
![\"\"](\"https:\/\/editorial.fxstreet.com\/miscelaneous\/_EUR_USD_2024-03-22_08-51-47-638466944116153591.png\")
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