The Euro (EUR) is currently trading at its highest level since January as markets anticipate the release of US CPI data that is expected to come in softer than expected. This anticipation is leading to speculation that the Federal Reserve may implement rapid rate cuts in the coming months, according to Scotiabank’s chief FX strategist, Shaun Osborne.
Resistance at 1.1140 Could Be Challenged
Osborne notes that the real and nominal yield spreads between the Eurozone and the US are narrowing, which is supporting the Euro’s gains. He estimates the fair value of the Euro at 1.1054 currently, indicating that the currency is poised for further gains and should remain supported even in the face of minor setbacks.
Technical indicators also support the bullish momentum of the Euro, with trend strength oscillators aligning positively across short-, medium-, and long-term DMIs. This suggests that the Euro could potentially reach the upper 1.10s in the short term, with little resistance seen before the December high of 1.1140. On the downside, support is seen at 1.0950/75.
Analysis:
The Euro’s recent strength can be attributed to market expectations of softer US CPI data and potential rate cuts by the Federal Reserve. This could lead to further gains for the Euro in the short term, with technical indicators supporting a bullish outlook. Traders should keep an eye on key resistance levels, such as 1.1140, and support levels at 1.0950/75 to gauge the Euro’s future performance. Overall, the Euro’s current trajectory suggests that it could continue to appreciate against the US Dollar in the coming weeks.