EUR/USD Daily Chart Analysis – 2024-03-12

The EUR/USD pair opened in New York near 1.0938, slightly down from the overnight high of 1.0943. The pair’s decline intensified as the U.S. dollar firmed, largely influenced by gains in U.S. 2-year Treasury yields.  A low of 1.09140 was observed before a rebound occurred, correlating with a general uptick in risk assets, as evidenced by dips in USD/CNH and rises in equities and gold.

Technically, the EUR/USD sitting below the Ichimoku Cloud (Kumo) top and a falling daily Relative Strength Index (RSI) are bearish signals, indicating potential concerns for bullish positions. The forthcoming U.S. CPI data and its implications for Federal Reserve policy represent a significant risk event on the horizon.

The dynamics between the U.S. and Eurozone interest rate differentials are at play, affecting the pair. With the U.S. yields climbing, the dollar gains attractiveness for yield-seeking investors. The impending U.S. CPI data will offer insights into inflation trends and influence expectations regarding the Federal Reserve’s policy decisions. A high inflation reading may suggest continued aggressive rate hikes, thereby bolstering the dollar against the euro.

Overall Market Sentiment: The overall market sentiment for EUR/USD appears bearish in the short term due to technical indicators and interest rate differentials favoring the U.S. dollar. However, the anticipation of CPI data introduces a degree of uncertainty, warranting a cautious approach from market participants.

Sentiment Percentage Breakdown:

• 70% Negative: The underperformance is evident through the price action below the Ichimoku Cloud and falling RSI, combined with unfavorable interest rate spreads.
• 20% Neutral: Despite the negative signals, the market awaits key economic data, introducing a wait-and-see approach.
• 10% Positive: There is minor positive sentiment stemming from the bounce as riskier assets caught a bid, suggesting not all bullish traders have exited their positions.