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US Dollar, EUR/USD: How to Trade the ECB Decision, Powell Speech This Week

Published 03/04/2024, 07:15 AM
Updated 09/02/2020, 02:05 AM
  • The Dollar Index retreats as market attention shifts to job data and Fed President Powell's remarks, impacting its trajectory.
  • The EUR/USD pair faces a crucial juncture after Euro-zone inflation slightly exceeds expectations, with the ECB's interest rate decision shaping the currency's next move.
  • Gold, surging to new 2024 highs, broke key resistance levels, closing above $2,088. Sustaining above $2,077 could propel gold toward $2,100 and beyond.
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The dollar index retreated on the last trading day of the previous week. This week, jobs data, along with statements from Fed President Powell, are set to determine the dollar's next move.

Over in the Eurozone, statements following the ECB interest rate decision will drive movements in the EUR/USD pair.

Meanwhile, gold surged significantly after the dollar eased last week, making new 2024 highs.

US Dollar Index: Powell to Drive the Narrative

After last week's data releases on Friday, the market's expectations that an interest rate cut could come in June have increased.

In line with this expectation, the DXY started the new week below this support after retreating by 0.25% to the support zone at 103.8, signaling that the downward trend will continue.

DXY Price Chart

The DXY continues to maintain 103.8 support while continuing its horizontal movement in a narrow band since February 21.

The 103.85 level in DXY continues to be followed as a pivot. While the upward attacks remain weak in the interest rate cut-oriented market, breaking the 103.7 level in the lower region may be a technical sign for the acceleration of sales in the dollar.

The DXY closely tracks the pivotal level at 103.85. While the market leans toward an interest rate cut, a break below 103.7 could signal a technical sign for increased dollar selling.

Fibonacci levels guide our focus on the 103.7 - 103.9 range as a potential support zone for DXY. A potential breakout may lead to 103.3, followed by 102.8 and 102.3, serving as short-term support levels.

Despite the Stochastic RSI indicating oversold conditions due to the recent downward trend, weak dollar demand has hindered upward movement. This week might witness developments that could trigger an upward shift.

On Wednesday, closely monitoring data such as ADP Employment and JOLTS, along with Powell's speech, will be crucial. If the data reflects a resilient labor force and Powell stresses a cautious approach to interest rate cuts, DXY may experience an upward shift over the 104 level.

The upcoming release of employment data and unemployment rates on Friday will play a decisive role in shaping the trend. Fed members have consistently emphasized the fundamental strength of the US economy in recent messages, reinforcing support for the dollar.

EUR/USD: How to Trade the ECB Decision

Euro-zone inflation came in slightly above expectations at 2.6%, supporting the ECB officials' views on patience in interest rate cuts. This week, it is highly likely that the ECB will keep its interest rate unchanged, while the statements to be made will be closely monitored.

EUR/USD Price Chart

According to the current situation, EUR/USD started the week by reaching last week's resistance price of 1.085 while turning its direction upwards with the support it found from the 1.088 limit due to the weakness in the dollar on Friday.

For the euro to continue its recovery against the dollar, it is important to see a daily close above 1.0875. Above this value, the trend can be expected to extend to the 1.09 band in the short term.

The critical point in possible pullbacks is currently 1.08, while daily closes below this level may see a pullback to 1.077 and then to 1.07. The general view in the market at the moment is that the stronger US data compared to Europe and the higher probability that the ECB may cut interest rates earlier may put downward pressure on EUR/USD.

Gold: Will the Gains Sustain?

Gold made an important breakthrough while moving last week. An ounce of gold closed above $2,040 towards the close of the week and managed to stay above the falling channel. On the last trading day of the week, gold, which saw rapid demand, closed above $ 2,080 with a daily value increase of nearly 2%.

Gold Price Chart

Gold, which found support from some data suggesting a contraction in the US economy on the closing day of the week, broke the upper line of the falling channel and technically made an important move. This week, data will be intense and we can see that the volatility in the gold market may continue according to the current economic data.

Gold tested the $2,088 level today, the last local peak it saw on December 28. With the day closing above this level, the precious metal can move towards the $ 2,100 band. In possible retreats, $ 2,077 seems important, while ounce gold can move towards $ 2,100 - 2,110 - 2,130 targets as long as it stays above this value throughout the week.

In the lower region, it may be possible to see a correction towards $ 2,058 below $ 2,077.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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