EUR/USD Holds Steady Ahead of Fed, ECB: Potential for Deeper Correction

The EUR/USD currency pair is currently in a holding pattern as investors await announcements from the Federal Reserve and the European Central Bank (ECB). There's a possibility of a more significant correction looming in the longer term.

Fed and ECB Announcements Set the Tone

The recent slowdown in disinflation has disrupted the Fed's plans for gradual interest rate cuts, which were initially projected to start from March with up to five cuts. The uncertainty stemming from weaker economic data releases has left the Federal Reserve's future interest rate decisions ambiguous.

Impact of U.S. Inflation Data

All eyes are on the upcoming U.S. inflation data, scheduled for release this Wednesday, as it could be a determining factor for future interest rate decisions. If the forecasts hold true, inflation is expected to remain at similar levels to the previous month.

Fed's Hawkish Stance vs. ECB's Dovish Outlook

While both the ECB and the Fed have kept interest rates steady, there's a noticeable difference in their approach. Recent statements from Federal Reserve board members indicate a growing hawkish sentiment, dismissing premature speculations of a hastened interest rate cut.

On the other hand, European Central Bank officials are leaning towards a more dovish stance, with expectations rising for an interest rate cut as early as June. This sentiment is supported by ECB board member Frank Elderson's assertion that June is a highly probable date for an ECB pivot.

Potential Impact on EUR/USD Pair

If the ECB proceeds with an interest rate cut before the Fed, it could lead to a unique scenario where the Fed follows the ECB's lead, potentially influencing the long-term trajectory of the EUR/USD currency pair.

Stabilizing U.S. Inflation

The upcoming U.S. inflation data presents a challenge for the Federal Reserve, as forecasts suggest minimal deviation from the previous month's figures. This could indicate a continued stabilization of inflation above the 3 percent mark, well beyond the inflation target.

Technical Analysis of EUR/USD

The EUR/USD pair has remained within a price channel for nearly a month, representing a correction within a broader downtrend. A significant technical scenario may unfold if buyers manage to breach the 1.0850 area, offering an opportunity for short positions due to the presence of a strong supply zone within this price range. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.