The EURUSD currency pair completes March, staying near the level of 1.08. Quotes started the current month at the same level, and all the growth that was achieved subsequently turned out to be short-term and did not develop into a trend. Having regained the initiative in their hands, the bears have the opportunity to increase the pressure on the price and lower it even lower, to the level of 1.076. Fundamental factors speak in favor of such development of events.
As expected by many analysts, Fed officials after the March meeting did not give clearly dovish signals regarding further monetary policy. Speaking at the beginning of the current week, Lisa Cook and Austan Goolsby asked to be cautious about starting dates of interest rates reduction. They are still waiting for confirmation of a decline in inflation in the housing market, which is stubbornly unwilling to show signs of a noticeable cooling.
Economists participating in the latest Bloomberg survey also point to the resilience of the U.S. economy. The Expected GDP growth rate for this year has been raised to 2.2%, and the probability of recession has fallen to a minimum of 35% since July 2022. According to experts' estimates, about 150 thousand new jobs will appear on the American labor market every month. Under such conditions, the potential for the Fed to cut interest rates looks very limited.
The situation in Europe is significantly different. Economic growth is near zero, and inflation is much closer to the 2% target than in the U.S. Because of this, the ECB has more opportunities to ease monetary policy. Yannis Stournaras, an official at the European regulator, urges not to look back at the Fed's actions and start the rate-cutting cycle as soon as possible. This will probably help prevent the recession, but the euro exchange rate risks to be under strong pressure.
The RSI indicator on the daily chart of EURUSD continues to decline, keeping the signal to sell the euro against the dollar. The nearest target is another test of the 1.08 level, and in case of success - further movement to 1.076.
The following trading strategy may be offered:
Sell EURUSD at the current price. Take profit 1 – 1.08. Take profit 2 – 1.076. Stop loss – 1.087.
This content is for informational purposes only and is not intended to be investing advice.
