empty
 
 
13.03.2024 05:25 PM
Which path will EUR/USD take?

Spring comes to everyone differently. Bank of France Governor and ECB Governing Council member Francois Villeroy de Galhau mentioned that the European Central Bank will lower rates this season. However, he specified that spring in Europe will span from April to June. While markets anticipate the second month, de Galhau does not dismiss the possibility of initiating monetary policy easing in April. This is unsurprising, given the close proximity of French inflation to the 2% target. Nevertheless, the situation varies in other Eurozone countries, and the ECB is not a solo actor in this theatrical scenario.

Dynamics of French Inflation

This image is no longer relevant

In 2024, financial markets are fixated on the timing of the onset of mass rate cuts by the world's leading central banks. Their shift from March to June for the Fed became the main driver of the U.S. dollar's strengthening in January–February. At the turn of winter and spring, investors reached a consensus with the December forecasts of the Fed, depriving the dollar of its main trump card. In March, it ceded leadership in the currency race among the Big Ten to the British pound.

Now, the markets are waiting for the updated FOMC rate forecasts. Does the Central Bank adhere to the previous position of three acts of monetary expansion, or is it ready to perform only two? In the first case, nothing will change—investors will continue to expect the start in June, and EUR/USD will likely strengthen its positions. In the second case, the timing will shift to July or September, which will drag the euro below $1.08.

However, attempting to predict the start dates of the monetary policy easing process is not the only way to forecast the future dynamics of the main currency pair. Nordea Markets analyzes bank reserves in the U.S. and the Eurozone and concludes that after a slight rise above 1.1, EUR/USD will decline.

Dynamics of EUR/USD and bank reserve ratio

This image is no longer relevant

This opinion contradicts HSBC's position, which expects the strengthening of the U.S. dollar in the short-term and the euro in the medium-term. However, if everyone always stood on the same side, buyers would have no counterparties for the deal.

In my opinion, the start dates are important, but in the future, investors will be interested in the speed of rate cuts. And if the Fed, due to a strong economy, can afford to ease monetary policy not at every FOMC meeting, then with the ECB, it's a different story. The weakness of the Eurozone dictates the need to cut the deposit rate not only in June but also in July. Therefore, Nordea Markets' theory looks more plausible to me than HSBC's.

This image is no longer relevant

In any case, EUR/USD did not receive the necessary hints from the labor market and inflation statistics in the U.S. and now eagerly awaits the March meeting of the Fed. Surely, the fate of the main currency pair will be decided there.

Technically, on its daily chart, there is an attempt by the bulls to play out a doji bar and bring quotes beyond the fair value range of 1.079–1.0945. If successful, a reversal pattern 1-2-3 may be formed, or an upward trend may be restored. Failure will allow selling EUR/USD.

Jana pendapatan melalui perubahan kadar mata wang kripto dengan InstaForex.
Muat turun MetaTrader 4 dan buka dagangan pertama anda.
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    SERTAI PERADUAN
  • Chancy Deposit
    Deposit akaun anda sebanyak $3,000 dan dapatkan $5000 lebih lagi!
    Dalam November kami membuat cabutan bertuah $5000 dalam Kempen Chancy Deposit!
    Dapatkan peluang untuk menang dengan membuat deposit $ 3000 ke dalam akaun dagangan. Setelah memenuhi syarat ini, anda menjadi peserta kempen.
    SERTAI PERADUAN
  • Trade Wise, Win Device
    Daftar untuk peraduan dan tambah dana akaun anda dengan sekurang-kurangnya AS$ 500 untuk layak memenangi peranti mudah alih.
    SERTAI PERADUAN
  • Bonus 100%
    Peluang istimewa anda untuk menerima bonus 100% pada deposit anda
    DAPATKAN BONUS
  • Bonus 55%
    Dapatkan bonus 55% pada setiap deposit anda
    DAPATKAN BONUS
  • Bonus 30%
    Dapatkan bonus 30% setiap kali anda membuat penambahan dana akaun anda
    DAPATKAN BONUS

Artikel yang dicadangkan

Tidak boleh bertanya sekarang?
Tanya soalan anda di Ruangan bersembang.
Panggilan semula Widget