Stagflation Risks on the Rise! EURUSD Remains Range-Bound

Summary:

European Central Bank policymaker Olaf Sleijpen has warned that rising energy prices could trigger broader inflation more rapidly than during the 2022 energy crisis.

BUY EURUSD

EXP

TRADING

1.15599

Entry Price

1.18000

1.14000

1.15445 -0.00143 -0.12%

0.0

Pips

Flat

1.14000

Exit Price

1.15599

Entry Price

1.18000

Fundamentals

European Central Bank (ECB) President Lagarde signaled policy flexibility during her conference remarks, indicating a potential rate hike as early as April if inflation shocks stemming from the Iran conflict become uncontrollable. However, she cautioned that current assessments are premature, emphasizing the need to evaluate the nature and scale of energy price impacts on overall inflation and second-round effects. The market is advised to monitor subsequent policy trajectories based on data. Concurrently, a decline in the German business confidence index in March highlighted the fragility of economic recovery. Under the dual pressures of receding expectations for an ECB rate hike and disappointing German economic data, the euro depreciated, falling below the 1.16 support level and extending its decline to a low of 1.1565. Furthermore, U.S. import prices surged by the largest margin since 2022, indicating that price pressures are broadening from energy to a wider range of goods. This development has led to market expectations for Federal Reserve rate cuts in 2026 nearly disappearing, a policy pricing that has consistently acted as a core resistance for the euro. A survey on Wednesday revealed a dip in German business confidence in March, with companies expressing increased pessimism about the future due to the Iran conflict. Germany's IFO institute reported that its business climate index fell to 86.4 in March, down from a revised 88.4 in the preceding month.

Technical Analysis

In the 1D timeframe, the EURUSD shows Bollinger Bands opening downward and moving averages diverging downwards, indicating the overall downtrend remains intact. While MACD's bearish momentum is subsiding and the MACD line and signal line have formed a golden cross, they are still a considerable distance from the zero line, suggesting the current rebound is incomplete. A probable continuation of the rebound is anticipated towards the EMA50 and the middle Bollinger Band, with price targets at 1.166 and 1.163, respectively. The RSI at 44 signifies prevailing market pessimism. In the 4H timeframe, the Bollinger Bands are narrowing, moving averages are flattening, and the MACD's MACD line and signal line are approaching the zero line, signaling a potential shift in momentum. The RSI at 47 also reflects market pessimism, but as long as the price avoids making new lows, the trend is likely to transition from bearish to bullish. Therefore, the recommended strategy is to buy on dips.

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Trading Recommendations

Trading Direction: Buy

Entry Price: 1.155

Target Price: 1.18

Stop Loss: 1.14

Support: 1.15, 1.14, 1.13

Resistance: 1.17, 1.18, 1.21

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Stagflation Risks on the Rise! EURUSD Remains Range-Bound

Risk Disclosure