Tight Fed policy and weak German data may threaten EURUSD stability

08 May 2024 94
Tight Fed policy and weak German data may threaten EURUSD stability

The EURUSD currency pair is moderately declining on Wednesday, as market participants are expecting new comments from the Federal Reserve (Fed) officials. Their remarks may clarify the regulator's plans on monetary policy easing in the US.


Minneapolis Fed President Neel Kashkari said on Tuesday that rates should be kept higher for longer due to volatile inflation.

According to CME's FedWatch Tool, markets currently estimate that US borrowing costs will be cut in September with a 65% probability.


Fed officials Philip Jefferson, Susan Collins and Lisa Cook will speak on Wednesday. Their hawkish comments may strengthen the dollar. Traders will also keep a close eye on the Consumer Sentiment Index data released by the University of Michigan on Friday.


Meanwhile, the European currency has declined on Wednesday after the macroeconomic data from Germany have been released. The volume of industrial production in Germany decreased by 0.4% in March compared to the previous month, as the Federal Statistical Office of the country reported. The volume of industrial production in March was 3.3% lower than a year earlier. If the market considers these data to be the beginning of a downtrend in the German economy, it could reduce the investment attractiveness of the euro.


EURUSD quotes are in a corrective uptrend on the H4 timeframe.


In terms of wave analysis, the price is forming the second ascending wave on the H2 timeframe. The Bears Power indicator (standard values) are in the negative zone, which shows the downside potential and the transition to the third descending wave.


Signal:

The short-term outlook for the EURUSD pair suggests selling.

The target is at the level of 1.0610.

Part of the profit should be taken at the level of 1.0685.

A Stop-loss could be set at the level of 1.0850.

 

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.

This content is for informational purposes only and is not intended to be investing advice.

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