The pair runs its fifth straight profitable week, helped by the recent policy divergence between the European Central Bank and the US Fed. The ECB had maintained its aggressive stance undeterred by the recent financial turmoil and hinted at further tightening if the economy evolves as projected.
Its US counterpart on the other hand, was constrained to a more conservative approach, despite sticky inflation and tight labor market, estimating that recent deployments will likely lead to credit tightening. Officials delivered a small 0.25 rate increase last week and maintained the 5.1% terminal rate projection, suggesting just one more hike of the same size before pausing.
The Fed's new approach will encounter its first test on Friday, with the PCE inflation update, after january's reacceleration. Another strong print will put renewed pressure on the Fed for further tightening, while a moderation could support the now conservative stance. Furthermore, Eurozone preliminary CPI inflation is due on the same day. Today we expect the German figures as well as well as final Q4 GDP form the US.
The technical outlook has not changed much since our last analysis, with bulls in control and the ability to push for new 2023 highs and tackle 1.1067. EUR/USD trades with caution though today, waiting the aforementioned key data that will determine the next leg of the move. There is risk for a slide to the EMA200 (at around 0.7120), although a breach of critical 1.0530-1.0461 seems tough given the monetary policy differential.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.