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EUR/USD rose to 1.1911 on Tuesday. Pressure on the USD increased amid concerns that external demand for dollar-denominated assets could decline significantly.
The reason behind this shift was reports suggesting that Chinese regulators have advised financial institutions to reduce their holdings of US government bonds. This move could help diversify risks and mitigate the impact of uncertain US economic policies.
Investors are awaiting delayed reports on the US labour market and inflation this week. These figures could adjust expectations regarding the Federal Reserve’s future policy direction.
White House economic adviser Kevin Hassett noted that the pace of US employment growth may slow in the coming months due to weaker labour and productivity growth.
The Fed is expected to leave interest rates unchanged in March, with markets still pricing in two rate cuts for the remainder of the year.
Technical Analysis
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On the H4 chart for EUR/USD, after a momentum rally in late January, the pair entered a phase of correction and consolidation. The price has recovered above the 1.1760 support level and is now testing the 1.1920-1.1950 area. The Bollinger Bands are narrowing, indicating stabilisation and preparation for the next move. The medium-term structure remains moderately bullish as long as prices stay above 1.1760.
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On the shorter-term H1 time frame, upward momentum remains confined to the short term. The price is moving along the upper Bollinger band after a sharp upward acceleration. It is now consolidating just below resistance at 1.1920-1.1950. Oscillators are in the overbought zone, raising the risk of a pause or shallow pullback, although the overall structure remains intact.
Conclusion
EUR/USD is poised for gains, driven by concerns about USD demand and a cautious outlook for US economic growth. While short-term fluctuations are expected, the medium-term trend remains bullish as long as key support levels hold. Investors will be closely watching upcoming data on inflation and employment, which could influence future Federal Reserve policy decisions.
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