EUR/USD retreated to the lower 1.0800s on Wednesday as European Central Bank (ECB) officials, including President Lagarde, signaled lower inflation, increasing the likelihood of potential interest rate cuts.
Key Factors:
- ECB Stance: Lower wage inflation and dovish comments from ECB leaders raise the possibility of rate cuts, weighing on the Euro (EUR).
- Fed Focus: Market anticipates the Fed’s policy meeting and revised economic forecasts (SEP), including potential changes to the “dot plot” regarding future rate cuts.
- ECB Division: Emerging divergence within the ECB suggests a possible earlier spring rate cut, further influencing EUR/USD.
Technical Outlook:
- Trend Reversal Signal: EUR/USD has likely reversed its short-term uptrend, with further downside pressure expected.
- Key Support Level: The 1.0800 level (February/March lows) presents crucial support.
- Bearish Signals: Tuesday’s bearish candlestick pattern and the MACD crossover add to the negative outlook.
- Dynamic Support: The 50-day and 200-day SMAs offer potential dynamic support levels.