EUR/USD edges down during the North American session yet it has bounced off daily lows hit at 1.1530 on heightened tensions in the Middle East, despite a jump on inflation in the Eurozone. The pair trades at 1.1618, down 0.63%.
Euro weighed by geopolitics, despite high EZ inflation
Geopolitical tensions remain high, sparking a flight to safety, boosting the US Dollar. Nevertheless, breaking news that US President Donald Trump ordered the United States Development Finance Corporation (DFC) to provide political risk insurance and guarantees for financial security of all maritime trade, especially energy traveling through the Persian Gulf, lifted the shared currency and pushed Oil prices lower.
Trump added that “if necessary, the US Navy will escort tankers through the Strait of Hormuz as soon as possible.”
Consequently, the Greenback trimmed some of its earlier gains according to the US Dollar Index (DXY). The DXY, which tracks the American’s currency value against a basket of other six, is up 0.50% at 99.04.
Fed commentary supports a higher USD
Data-wise the US economic docket was absent, yet some Federal Reserve Regional Bank Presidents crossed the wires.
New York Fed President John Williams said monetary policy is “well positioned,” adding that if inflation evolves as anticipated, additional rate cuts would eventually be appropriate.
On the other hand, Kansas City Fed’s Jeffrey Schmid was hawkish and warned that inflation remains “too hot” and must return to the 2% target. Minneapolis Fed President Neel Kashkari echoed concerns, stating that inflation is still elevated and that the economy’s resilience points to a higher neutral rate.
In the Eurozone (EZ), inflation exceeded forecasts in February, still it was below the European Central Bank’s (ECB) 2% goal. The Harmonized Index of Consumer Prices (HICP) in February rose by 1.9% YoY up from 1.7%. Underlying HICP was slightly hotter than headline inflation, jumping from 2.2% to 2.4% YoY.
The ECB Chief Economist Philip Lane expressed concerns that scarcity of oil and gas supplies, could cause a “substantial spike” in inflation and a fall in output in the EZ. Echoing his comments was Stournaras who said that should the Middle East war continues, there will be upward pressure on inflation.
EUR/USD Price Forecast: Euro’s upside limited beneath 200-day SMA
The technical picture turned slightly negative for the EUR/USD, which tumbled below the 200-day Simple Moving Average (SMA) at 1.1664, a signal that could prompt sellers to step into the market and push prices lower. During the day, the major reached a daily low of 1.1530 before reclaiming 1.1600 and it seems poised to end the day above the January 19 swing low at 1.1576.
Momentum turns bearish as depicted in the Relative Strength Index (RSI). But Trump comment, relieved investors and pushed the Shared currency past the 1.1600 milestone.
As of writing, the EUR/USD first resistance is the 200-day SMA at 1.1664. If surpassed, traders will look at the 100-day SMA at 1.1668 followed by 1.1700. A breach of the latter clears the path for a recovery, with eyes set at the 50-day SMA at 1.1773.
On the flip side, a drop below 1.1600 opens the door to test 1.1576, followed by the day’s low 1.1530 ahead of 1.1500.
EUR/USD Daily Chart
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