FUNDAMENTAL OVERVIEW
USD:
The US dollar remains supported across the board amid the US-Iran war and triple digit oil prices. We are having a pullback today after WSJ reported that Trump would be open to end the war without pushing for a reopening of the Strait of Hormuz. That would be great news for the markets as the Iranians will likely reopen the Strait as soon as the US forces withdraw.
We will need Trump to announce that though as the only thing we got till now were speculations and empty words aimed at jawboning the markets. Trump is certainly very uneasy right now with the stock market making new lows, much higher Treasury yields, triple digit oil prices and the Fed in a "wait and see" mode.
The path of least resistance for the dollar remains to the upside but traders will keep a watchful eye on the headlines and especially on Trump’s Truth Social account, as we are always one post away from huge market moves.
Traders are not pricing in any change to interest rates this year as we have just 3 bps of easing expected by year-end.
EUR:
On the EUR side, the recent data showed what everyone expected to happen to the economy, that is higher headline inflation and weaker economic activity. The ECB continues to stress vigilance and maintain a data-dependent and meeting-by-meeting approach. ECB policymakers are keeping a tightening bias conditional to the length of the conflict.
The market is pricing in a 58% chance of a rate hike at the upcoming meeting with an 87% probability of a move in June. The total tightening expected by year-end is currently seeing roughly three rate hikes.
The ECB will likely look through the inflation spike at the April meeting but lay the groundwork for a rate hike in June if the US-Iran conflict were to persist. These expectations will get repriced quickly though if the war were to end in the next couple of weeks.
EURUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that EURUSD eventually rejected the trendline and fell below the 1.15 handle again. The natural target is the 1.1392 level where we can expect the buyers to step in with a defined risk below the level to position for a rally back into the 1.16 handle. The sellers, on the other hand, will look for a break lower to increase the bearish bets into new lows.
EURUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a downward trendline defining the bearish momentum. The sellers will likely continue to lean on the trendline with a defined risk above it to keep pushing into new lows, while the buyers will look for a break to pile in for a pullback into the major trendline around the 1.1550 level.
EURUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the sellers will look for a rejection around the trendline, while the buyers will look for a break. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the US Consumer Confidence and US Job Openings data. Tomorrow, we have the US ADP, the US Retail Sales and the US ISM Manufacturing PMI. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US NFP report.
