EUR/USD Analysis Today 4/16: Buying Levels (Chart)

• Amid a pessimistic outlook, the heavy losses suffered by the euro’s price last week against the US dollar open the door to further declines in the coming days.
• The price of the EUR/USD currency pair fell towards the support level of 1.0618, the lowest in five months, and stabilized around losses early in Tuesday’s session.

According to the best regulated Forex currency trading platforms in Italy, the exchange rate of the euro against the US dollar weakened further after support around 1.07 failed to hold.

Commenting on the performance of the EUR/USD exchange rate, Sean Osborne, Senior Forex Analyst at Scotiabank, says: “There is a deeper upward correction in the euro in the fourth quarter towards 1.06, or lower, (support to the 76.4% correction at 1.0611) evolving”. Roberto Mialich, Forex Market Analysis Expert at UniCredit Bank in Milan, adds: “The EUR/USD exchange rate is likely to remain weak below the 1.07 level, as markets now expect earlier easing and deeper by the European Central Bank than the Federal Reserve this year.”

Last week, the European Central Bank confirmed market expectations for a rate cut in June, but the heavy sell-off in EUR/USD has more to do with a rising US dollar. In fact, all dollar exchange rates have seen significant movements following the massive recalculation of interest rate expectations by the US Federal Reserve.

Markets had abandoned expectations of an interest rate hike from the Federal Reserve in June and are now looking at one or two rate hikes from the Federal Reserve in 2024, maintaining expectations for the Bank of England and the other European central banks to cut interest rates more generously. At the same time, the strength of the US dollar is reinforced by the fear spreading through stock markets that the recovery in 2024 will have to succumb to the realities of the US higher interest rate regime for a longer period. This “risk avoidance” environment has proven to be a boon for “safe haven” currencies like the US dollar, ensuring that we are in a profitable position for both sides of the US dollar.

Analysts put the total amount of expected easing this year by the Federal Reserve at about 45 basis points, compared to the 150 basis points expected at the start of the year. They add: “On the other hand, the ECB’s interest rate cut in June was almost completely priced in,” they reported. “Markets are therefore confident that the ECB is likely to start an easing cycle before the Fed and that it is likely to be heavier, with interest rates around 80 basis points and this year’s cuts now embedded in the Fed’s forward interest rates. eurozone”.

They added: “Given this interest rate cut outlook, the EUR/USD rate has fallen below the 1.07 support and is expected to remain weak for the time being.” Even a recovery towards the 1.08 resistance looks difficult now, unless investors return to evaluating more intense easing by the Fed relative to the ECB, a prospect that seems unlikely now.”

In this regard, Alex Kuptsikevich, chief market analyst at FXPro, looks ahead to the next possible levels the euro could face against the US dollar, as he sees 1.05 on the way. The analyst said: “The pair is likely to test the strength of this support again very soon, and the accumulated difference in the policy of the Federal Reserve and the European Central Bank increases the chances that the pair will not stop this time. ” He added: “If the price of EUR/USD actually falls below 1.05 in April, the pair may fall to the next stop, finding support only near 0.95,” he warns.

Economic Calendar data

There isn’t much on the US and Eurozone calendars that raises concerns for the Forex markets. However, we will be monitoring the US Retail Sales release early in the trading week. A strong reading here will only confirm that strong consumer demand is driving the continued rise in inflation. The US dollar’s recent advance could be extended if data beats the consensus forecast of 0.3% m/m.

Technical Analysis and EUR/USD Forecast:

According to today’s trading outlook performance, the price of the euro against the US dollar EUR/USD is still bearish. Its recent losses have moved some technical indicators towards strong selling saturation levels. However, continued drivers of US dollar gains must be considered, amid clear disappointment with the imminent start of interest rate cuts by the European Central Bank. Furthermore, stronger numbers for the US economy will allow bears to move the currency pair towards stronger support levels, the closest of which are currently 1.0590, 1.0500 and 1.0470 respectively. Until now, the euro-dollar’s gains will remain limited and vulnerable to a rapid collapse.

Overall, the outlook for EUR/USD remains tilted to the downside, with the US dollar likely to maintain its strength against the euro in the near term.