The EUR/USD pair has been losing value since early February and hit two-month lows around 1.0600 the day before. The publication of the minutes of the February meeting of the US Federal Reserve, which confirmed the determination of officials to continue raising the interest rate, contributed to the strengthening of the positions of the American currency.
Inflation remains well above the 2.0% target and the labor market is strong enough to put upward pressure on wages. Some correction in consumer prices over the past few months, according to officials, is not yet sufficient evidence of a change in trend, so the increase in interest rates will continue, while its size may again return to 50 basis points. The minutes caused a mixed market reaction. On the one hand, this position of officials indicates continued support for the national currency, and on the other hand, too sharp tightening of monetary policy increases the risks of a recession in the national economy, the likelihood of which, according to some members of the Federal Open Market Committee of the US Federal Reserve (FOMC), is increased.
The European economy, in turn, fixes positive signals indicating the possibility of avoiding a recession and preventing a serious weakening of the euro. However, recent inflation data has been mixed. The January Consumer Price Index in Germany, published the day before, began to grow again after several months of slowdown: on a monthly basis, inflation reached 1.0%, and on an annualized basis it amounted to 8.7%. Similar data on the eurozone will be released today, and if the acceleration of the indicator is confirmed, the pressure on the European currency may increase.
The price is close to 1.0588 (Fibonacci retracement 38.2%), the breakdown of which will give the prospect of further decline in quotations to the levels of 1.0500 (Murrey level [2/8]) and 1.0376 (Murrey level [1/8]). The key level for the "bulls" is 1.0742 (Murrey level [4/8], center line of Bollinger Bands). Its breakout may cause the price to return to the levels of 1.0890 (Fibonacci retracement 50.0%) and 1.0986 (Murrey level [6/8]); however, this movement option seems less likely.
Technical indicators point to the continuation of the downward trend: Bollinger Bands and Stochastic are directed downwards, while the MACD is increasing in the negative zone.
Resistance levels: 1.0742, 1.0890, 1.0986. | Support levels: 1.0588, 1.0500, 1.0376.