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EUR\/USD is edging higher on Wednesday, making it back into the 1.0770s and extending the previous day\u2019s rebound from six-week lows. It is still too early to say whether the move is corrective in nature or a reversal of the dominant short-term downtrend \u2013 but probably the former.\u00a0<\/p>\n
The release of\u00a0Harmonized Index of Consumer Prices (HICP) and the Unemployment Rate on Wednesday has done little to impact the pair despite\u00a0showing a further cooling in price pressures. Headline inflation in the Eurozone dipped to 2.4% YoY in March when economists had anticipated it remaining unchanged at 2.6%, according to data<\/a> from Eurostat. Core inflation slipped to 2.9% from 3.1% when no-change had also been forecast.\u00a0<\/p>\n Month-on-month inflation in the Eurozone rose by 0.8% compared to 0.6% in February. The Unemployment Rate in the Eurozone rose to 6.5% when no-change from its 6.4% previous level (revised up to 6.5%) had been anticipated.\u00a0<\/p>\n Although the data has not weakened the pair,\u00a0it will have increased the chances of an even earlier interest-rate cut from the ECB, possibly even raising the prospect of a cut in April.\u00a0<\/p>\n EUR\/USD has been bearish since the second week of March, mainly on the back of shifting expectations regarding the outlook for interest rates<\/a> in Europe and America. In the US, borrowing costs are expected to remain higher for longer, supporting the US Dollar (USD), since higher interest rates attract more foreign capital inflows. This view is unlikely to change much.\u00a0<\/p>\n On both sides of the Atlantic inflation has been falling, removing the necessity for high interest rates. However, in the US the process has been slower and experts are not as confident it is on its way down to the Fed\u2019s 2.0% target in a sustainable fashion.\u00a0<\/p>\n Most economists had expected both the European Central Bank (ECB)<\/a> and the US Federal Reserve (Fed) to begin cutting interest rates at about the same time, in June or thereabouts. However, more recently the outlook has started diverging, with the Fed seen as possibly delaying and the ECB as bringing forward the moment.\u00a0\u00a0<\/p>\n EUR\/USD rebounded from six-week lows in the 1.0720s on Tuesday although it is unclear what prompted the move. It may have been predominantly technical in nature due to indicators reaching oversold readings on intraday charts.\u00a0<\/p>\n It is also possible that commentary<\/a> from Federal Reserve Bank of San Francisco President Mary Daly may have contributed marginally to the recovery as she struck a dovish tone, saying \u201cthree rate cuts this year as a \u2018reasonable\u2019 baseline,\u201d although she added that three rate cuts was \u201cnot a promise.\u201d However, there was no immediate reaction from prices when her words hit the wires.\u00a0<\/p>\n The HCOB Eurozone<\/a> Manufacturing PMI could also have provided a catalyst for EUR\/USD\u2019s recovery, after it was revised up to 46.1 in March from a flash estimate of 45.7. However, it remains below 50 and therefore in contraction territory. Additionally, the US ISM manufacturing PMI on Monday was even better and actually rose above 50 to 50.3 in March \u2013 reaching growth territory for the first time since November 2022.\u00a0<\/p>\n In the US the main data release on Wednesday will probably be ADP<\/a> Employment Change at 12:15 GMT, seconded by the final S&P Global Services PMI and the ISM Services PMI<\/a>. Services inflation is seen as one of the stickiest components in the CPI basket so markets may pay extra attention if the real figure diverges from expectations.\u00a0<\/p>\n More Fedspeak is also in the offing with Fed’s Bowman, Goolsbee, Barr, Kugler, and Powell all due to speak.<\/p>\n EUR\/USD<\/a> rebounded from short-term multi-week lows in the 1.0720s on Tuesday and in the process formed a bullish Piercing Line Japanese candlestick<\/a> reversal pattern on the daily chart<\/a>. This occurs when price makes a new low but on the same day recovers and closes above the midpoint of the previous day.\u00a0<\/p>\n The pattern could indicate a temporary continuation of the rebound higher, with the next key resistance coming into play at the resistance level from the swing low (and B wave low of the prior ABC pattern) at 1.0798.\u00a0<\/p>\nEUR\/USD: It\u2019s all down to interest rate expectations<\/h2>\n
On the horizon<\/h2>\n
Technical Analysis: EUR\/USD bounces off new lows<\/h2>\n