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EUR/USD Slides Below 1.0800 After ECB Considers Slower Hikes

Published 01/17/2023, 03:12 PM
Updated 07/09/2023, 06:32 AM

The EUR/USD pair fell for a third day in a row on Tuesday, briefly dipping below the 1.0800 level, as the euro weakened amid rumors the European Central Bank (ECB) will slow down the pace of rate tightening.

At the time of writing, the EUR/USD pair is trading at the 1.0800 zone, 0.18% below its opening price, as it continues to back away from a nine-month high of 1.0874.

The euro took a hit after reports that the European Central Bank policymakers are considering a slower pace of interest rate hikes after a 50 basis points increase in February.

Still, the dollar remains unable to gather enough momentum, limiting EUR/USD slide, amid expectations the Fed is also slowing the pace of rate hikes. The WIRP tool suggests a 25 bp move is already priced in by investors, with only 10% odds of a 50 bp increase seen at the Feb. 1 meeting.

On the data front, the German annual inflation rate for December was confirmed at 9.6%, measured by the Harmonized Index of Consumer Prices, while ZEW survey data offered an optimistic picture of economic sentiment amongst German and Eurozone citizens. On Wednesday, the U.S. will unveil Producer Price Index, retail sales and industrial production figures for December.

EUR/USD Daily Chart

From a technical standpoint, the EUR/USD maintains a bullish perspective according to indicators on the daily chart despite the price making lower lows. The RSI has turned south but remains well into positive ground, while the MACD is printing lower green bars reflecting the dwindling bullish momentum.

If the EUR/USD loses the 1.0770 area, it could find next support levels at 1.0700 and then at the 20-day SMA around 1.0680. On the flip side, if the euro manages to break above the 1.0875 zone, it could pave the way toward the 1.0900 Fibonacci level en route to the 1.0935 zone.

Latest comments

If commodity and other risk asset prices keep rising, I can see Powell and friends hitting the market with some “the party is over” type of moves
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