EUR/USD Daily Chart Analysis

The EUR/USD has seen a rebound above the flat line following a month-end led dip, regaining ground amid a broader recovery that began mid-month. This recovery is largely attributed to tightening bund-Treasury yield spreads, driven by market expectations surrounding Fed-ECB policy easing. Technically, the currency pair’s rise since mid-February has approached the peaks of February 22 at 1.0889/97, which now serve as pivotal levels. These peaks are underscored by the proximity to the 0.618 Fibonacci retracement level. A key technical observation is the pair’s position relative to the significant level of 1.09, with a close above this price potentially signaling an extension of February’s recovery. The next notable technical hurdle is the cloud top and 76.4% Fibonacci retracement level at 1.0932, which may act as resistance.

Fundamental Analysis: Fundamentally, the markets are bracing for critical inflation data from both the Eurozone and the US. Inflation rates in both economies are expected to show signs of retreat, albeit at a pace that the market may still deem too slow, influencing central bank policy decisions. The Fed and ECB are both pushing back on expectations for quick rate cuts, which has been a significant factor in the pair’s recent dynamics.

Overall Market Sentiment: The market sentiment for EUR/USD can be quantitatively summarized as follows:

• 60% Positive: Buoyed by the tightening yield spreads and the pair’s technical recovery, there is a positive sentiment in anticipation of a potential move above the 1.09 level.
• 30% Neutral: With key economic data on the horizon, a substantial part of the market is in a holding pattern, adopting a neutral stance until new information is available.
• 10% Negative: A small portion of the market remains cautious, considering the potential for inflation data to influence central bank policy in a way that may not support the current recovery.

The positive sentiment reflects the recent tightening of yield spreads and the technical posture of the pair above key moving averages. The neutral sentiment acknowledges the pending economic data releases that are likely to provide the next catalyst for movement. The negative sentiment allows for the possibility that forthcoming inflation figures could prompt a reassessment of the central banks’ easing expectations, which could challenge the pair’s recent gains.