The EUR/USD pair dipped below the key 200-day SMA on Friday following remarks from Bundesbank’s Nagel regarding the potential for an early interest rate cut by the ECB. Despite a temporary bounce fueled by positive German IFO Business Sentiment data, the pair remains in the lower 1.0800s, painting traders’ screens red. The possibility of a rate cut before the summer recess, most likely in June according to Nagel, has added to the negative sentiment surrounding the pair.
While the German IFO data showed improvement, with the Business Climate Index hitting a 9-month high in March, it only managed to provide a temporary respite for the struggling EUR/USD pair. The indices beating market expectations did little to reverse the downward trend in the currency pair. Furthermore, central bank figures are expected to play a crucial role in shaping the outlook for interest rates, potentially leading to increased volatility in the forex market.
The day ahead will likely be influenced by comments from central bankers, with the ECB and the Fed expected to consider rate cuts in June. Any deviation from this consensus could impact the currency market significantly. As the EUR/USD pair tests key support levels such as the trendline and 200-day SMA, traders are urged to exercise caution as the lack of momentum suggests a potential false break could lead to unexpected price movements in the near future.
