Dual Storms Hit the Market! EURUSD Holds Firm Above 1.15

Summary:

Soaring oil prices may exert selling pressure on the euro, as the eurozone is a major net energy importer with an economy highly vulnerable to stagflation shocks.

BUY EURUSD

EXP

TRADING

1.15015

Entry Price

1.18000

1.13000

1.14158 -0.00943 -0.82%

0.0

Pips

Flat

1.13000

Exit Price

1.15015

Entry Price

1.18000

Fundamentals

ECB Vice President Luis de Guindos said on Wednesday that financial market volatility could amplify shocks to the economy. The ECB is expected to consider various scenarios for growth and inflation when setting policy next week. The spillover effects of the Iran conflict may have lifted inflation and increased pressure on the ECB to intervene to contain price pressures. De Guindos acknowledged that the forecasting process has become "more complex" and that market volatility could have a larger impact on the real economy. "The effects of the energy shock may be amplified, potentially leading to more severe shocks to economic activity," he said at a conference in Madrid. The ECB needs to consider different scenarios, embracing uncertainty and difficult projections, much like during the 2004 Russia-Ukraine conflict, de Guindos noted.

Financial markets price in a rate hike by the ECB in the autumn. Higher oil prices will feed through to prices, with reduced tolerance for upside inflation surprises, drawing on the 2011/2022 experience when the ECB was forced to hike rates at an unprecedented pace to prevent price growth from surging into double digits.

Meanwhile, de Guindos warned of downside risks to the economy from the conflict. The surge in energy prices triggered by the Iran conflict is reshaping ECB policy expectations. Several ECB officials have warned that the central bank would act decisively if energy-driven price gains spread to broader consumer prices, fueling market bets on tighter policy.

ECB Governing Council member Peter Kazimir, Governor of the National Bank of Slovakia, said the timing of a rate hike "could be closer than many think," and further discussions on rate cuts are "off the table." Bloomberg data shows a 60% probability of a rate hike by the ECB before June and around a 35% chance of another hike by year-end. Joachim Nagel, President of the Bundesbank, echoed the same day that the ECB would act "promptly and decisively" if higher energy prices translated into broader consumer price inflation. ECB President Christine Lagarde stressed that the ECB would take "all necessary measures" to keep inflation in check, preventing a repeat of the 2022-2023 inflation shock. Peter Kazimir's comments were the most hawkish in this round of ECB official communications, explicitly stating that the balance of inflation risks is "clearly tilted to the upside" and emphasizing that rate hikes can start without waiting for quarterly projections, with "no reservations about hiking without new forecasts."

The ECB is expected to keep rates unchanged at next week's meeting and present multiple scenarios for growth and inflation under a prolonged conflict. Reuters data shows that money markets price in a slightly above 50% probability of lifting the policy rate to 2% by year-end.

On Wednesday, the U.S. Bureau of Labor Statistics reported that the CPI rose 0.3% MoM in February, following a 0.2% increase in January. On a YoY basis, the CPI climbed 2.4%, in line with expectations and January's figure, reflecting the dissipation of the high base effect from the same period last year. Energy prices rose 0.6% MoM and 0.5% YoY, while food prices increased 0.4% MoM and 3.1% YoY. Egg prices fell 3.8% MoM and a sharp 42.1% YoY. Core CPI, excluding food and energy, rose 0.2% MoM in February, after a 0.3% increase in January, and was up 2.5% YoY, matching expectations and January's print.

Housing, the largest component of the CPI, rose 0.2% MoM and 3% YoY, with rents increasing just 0.1% MoM—the smallest monthly gain since January 2021. Apparel prices, sensitive to tariff pressures, rose 1.3% MoM, while new car prices were stable, up only 0.5% YoY.

Despite firms absorbing most import tariffs, Wall Street institutions believe that given persistent high input costs in ISM surveys, businesses are unlikely to continue bearing all costs. Following the Supreme Court ruling, U.S. President Trump has announced a 10% global tariff and signaled plans to raise it to 15%.

Stephen Stanley, Chief U.S. Economist at Santander Capital Markets USA, noted: "The issue is that while tariff levels have largely stabilized, there is evidence that input costs continue to rise. The cost pass-through effect could persist for some time."

Following the latest inflation data, market expectations for Fed rate cuts have cooled. According to the CME FedWatch Tool, before the data release, markets priced in a 99% probability of the Fed keeping rates unchanged at the March meeting next week. The probability of a rate cut at the April meeting stood at just 11%, up from 21% a month earlier. Traders now price in the first Fed rate cut for September, with a roughly 43% chance of a second cut by year-end.

Technical Analysis

On the daily chart for EURUSD, Bollinger Bands are widening downward, with MAs diverging lower, confirming the prevailing downtrend. MACD downside momentum remains intact, with the lines consistently below the zero line, pointing to further downside toward the psychological level of 1.15 and the recent low near 1.139. The RSI stands at 28, in oversold territory, suggesting a potential rebound at any time but with a higher probability of further declines.

On the 4-hour chart, Bollinger Bands are widening downward, and MAs are diverging lower. The MACD lines have broken below the zero line and formed a new death cross, signaling a bearish regime. However, downside momentum has eased, and a rebound is imminent. The RSI at 36 reflects bearish sentiment. The bearish trend will remain intact unless prices break above EMA12 on a closing basis.

Therefore, short-term strategy favors buying first, followed by selling.

Trade Recommendations

Trade Direction: Buy

Entry Price: 1.15

Therefore, short-term strategy favors buying first, followed by selling.

Dual Storms Hit the Market! EURUSD Holds Firm Above 1.15_1

Dual Storms Hit the Market! EURUSD Holds Firm Above 1.15_2

Trade Recommendations

Trade Direction: Buy

Entry Price: 1.15

Target Price: 1.18

Stop Loss: 1.13

Support: 1.15/1.14/1.13

Resistance: 1.17/1.18/1.21

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data

Dual Storms Hit the Market! EURUSD Holds Firm Above 1.15

Risk Disclosure