Euro Forecast: EUR/USD Continues to Coil Within January Range

Euro Outlook: EUR/USD

EUR/USD may break out of the January range as it attempts to extend the advance from the start of the week, but the exchange rate may consolidate over the remainder of the month should it track the flattening slope in the 50-Day SMA (1.0391).

Euro Forecast: EUR/USD Continues to Coil Within January Range

EUR/USD approaches the January high (1.0533) again as European Central Bank (ECB) board member Isabel Schnabel warns that ‘maintaining price stability will require higher real interest rates in the future than before the pandemic,’ with the official going onto say that ‘over the past year, the degree of policy restraint has declined appreciably – to a point where we can no longer say with confidence that our policy is restrictive.’

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In turn, Schnabel argues ‘the fact that growth remains subdued cannot and should not be taken as evidence that policy is restrictive’ while speaking at an event held by the Bank of England (BoE), and it seems as though the ECB will switch gears at a slower pace as ‘higher real interest rates seem to be the most likely scenario for the future.’

With that said, waning speculation for another ECB rate-cut may keep EUR/USD afloat, but the exchange rate may track the flattening slope in the 50-Day SMA (1.0391) should it struggle to push above the January high (1.0533).

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

• EUR/USD holds above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone to trade near the monthly high (1.0528), with a breach above the January high (1.0533) raising the scope for a move towards the 1.0580 (78.6% Fibonacci extension) to 1.0610 (38.2% Fibonacci retracement) region.
• Next area of interest comes in around the December high (1.0630), but EUR/USD may struggle to retain the advance from earlier this month should it fail to push above the January high (1.0533).
• Lack of momentum to hold above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone may push EUR/USD back towards 1.0370 (38.2% Fibonacci extension), with the next area of interest coming in around the monthly low (1.0211).

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--- Written by David Song, Senior Strategist

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