US Dollar Forecast: EUR/USD Vulnerable to Negative Slope in 50-Day SMA

US Dollar Outlook: EUR/USD

EUR/USD trades to a fresh weekly low (1.0796) as it gives back the minor advance following the downtick in the US Personal Consumption Expenditure (PCE) Price Index, and the exchange rate may track the negative slope in the 50-Day SMA (1.0874) amid the failed attempts to test the monthly high (1.0898).

US Dollar Forecast: EUR/USD Vulnerable to Negative Slope in 50-Day SMA

EUR/USD continues to hold below the moving average even as the core PCE, the Federal Reserve’s preferred gauge for inflation, narrows to 2.8% in January from 2.9% per annum the month prior, and it remains to been if the update the Euro Area’s Consumer Price Index (CPI) will sway the exchange rate as the report is anticipated to show a further slowdown in inflation.

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Euro Area Economic Calendar

FOREX.com Economic Calendar

A downtick in both the headline and core CPI may produce headwinds for the Euro as it encourages the European Central Bank (ECB) to move away from its restrictive policy, and the Governing Council may gradually prepare Euro Area households and businesses for lower interest rates as President Christine Lagarde insists that ‘the current disinflationary process is expected to continue.’

However, a higher-than-expected Euro Area CPI print may prop up EUR/USD as it puts pressure on the ECB to further combat inflation, and President Lagarde and Co. may stick to the sidelines over the coming months as ‘further progress needed to be made in the disinflationary process before the Governing Council could be sufficiently confident that inflation was set to hit the ECB’s target in a timely manner.’

With that said, the opening range for March is in focus as EUR/USD registers a fresh weekly low (1.0796), and the exchange rate may track the negative slope in the 50-Day SMA (1.0874) as it continues to hold below the moving average.

EUR/USD Chart – Daily

Chart Prepared by David Song, Strategist; EUR/USD on TradingView

• EUR/USD appears to be reversing ahead of the monthly high (1.0898) as it continues to hold below the 50-Day SMA (1.0874), and the exchange rate may track the negative slope in the moving average amid the failed attempts to close above the 1.0870 (23.6% Fibonacci extension) to 1.0880 (23.6% Fibonacci extension) region.
• A break/close below 1.0790 (61.8% Fibonacci retracement) may push EUR/USD towards the monthly low (1.0695), with the next area of interest coming in around 1.0610 (38.2% Fibonacci retracement) to 1.0650 (78.6% Fibonacci retracement).
• Nevertheless, failure to break/close below 1.0790 (61.8% Fibonacci retracement) may curb the recent decline in EUR/USD, with a move above the 1.0870 (23.6% Fibonacci extension) to 1.0880 (23.6% Fibonacci extension) region bringing the monthly high (1.0898) back on the radar.

Additional Market Outlooks

US Dollar Forecast: USD/JPY Ascending Triangle Takes Shape

Australian Dollar Forecast: AUD/USD Reverses Ahead of Monthly High

--- Written by David Song, Strategist

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