EUR/USD eases toward 1.0700 ahead of EU/US data

EUR/USD is retreating toward 1.0700 in early Europe. The US Dollar is finding its feet amid increased odds of a 25 bps March Fed rate hike. Meanwhile, fears calm over the SVB fallout but EUR/USD fails to capitalize ahead of Eurozone and US data.

The EUR/USD matched Monday’s high slightly below 1.0750 and pulled back to as low as 1.0677. The pair rose again toward recent highs during the American session, reflecting that the bullish momentum is still in place, but not strong enough for a break above 1.0750. The daily chart shows the price firm above the 20-day Simple Moving Average, which stands at 1.0630. Even a correction to the mentioned SMA would not change the positive outlook for the Euro. On the upside, the pair needs to surpass a series of important resistances between 1.0750 and 1.0780 in order to attract new buyers.

The 4-hour chart shows risks tilted to the upside, but EUR/USD needs to climb above 1.0750 over the subsequent sessions in order to avoid a deeper correction. The immediate target of a bearish move is the 1.0670 zone. Below, attention would turn to 1.0630/40, a critical uptrend line and the confluence of the 55- and 100-period Simple Moving Averages.

The EUR/USD continued its positive streak on Tuesday but failed again to break above 1.0750. The key driver in the short term continues to be a weaker US Dollar, which managed to stabilize, absorbing critical US economic data.

Data released on Tuesday showed US consumer inflation cooled marginally in February, in line with expectations. The Consumer Price Index slowed from 6.4% to 6%, and the core rate from 5.6% to 5.5%. US yields rose further afterwards, helping the US Dollar and then stabilized. On Wednesday, Retail Sales and the Producer Price Index will be released in the US. Those numbers and ongoing development regarding the banking crisis will be watched closely.

Markets have not heard from FOMC members as the blackout period started on Saturday ahead of the next meeting. Fed’s officials are likely taking into consideration the impact of the Silicon Valley Bank (SVB), although they are still thinking of continuing the tightening cycle, probably ending a little sooner than what they were forecasting last week. The Dollar could gain momentum if Fed tightening expectations recover to previous levels.

The European Central Bank (ECB) will have its policy meeting on Thursday. It is expected to align with its previously announced plans to hike interest rates by 50 basis points. However, recent market turmoil and a clouded outlook could lead to more opposition a the Governing Council to the hawkish guidance. On Wednesday, Eurostat will release Industrial Production data for January, and Germany will report on wholesale inflation.

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