During the North American session on Wednesday, the exchange rate of EUR/USD climbed and broke through the 1.1050 level, which was jointly driven by the weakening of the US dollar and the strengthening of the euro. The trade frictions between the United States and other major economies have escalated, and the market is worried that Trump’s tariff policies may push the US economy into a recession. As a result, traders’ expectations for the Federal Reserve to resume the loose monetary policy cycle have increased. The probability of the Federal Reserve cutting interest rates in May has risen from 10.6% a week ago to 52.5%, and traders are convinced that the Federal Reserve will cut interest rates at the June meeting.
Investors are waiting for the minutes of the Federal Open Market Committee (FOMC) meeting in March to obtain new clues about the prospects of monetary policy. In March, Federal Reserve officials stated that interest rates should remain in the current range of 4.25% – 4.50% until they clearly understand how the president’s policies will affect monetary policy and the economic outlook.
The US March Consumer Price Index (CPI) data will be released on Thursday, and investors are paying attention to it. The inflation report is expected to show that the overall CPI and core CPI will increase moderately by 2.6% and 3% respectively.
On the daily chart, EUR/USD is in an upward channel pattern. Currently, it is near the middle of the channel. It has broken through the short-term resistance at 1.1050 and is approaching the key resistance level of 1.1150. The lower track of the channel and the 200-day moving average (MA200) at 1.0738 form a strong support area. Although there are signs of a bearish divergence in the daily Moving Average Convergence Divergence (MACD) indicator, the difference between the DIFF line and the DEA line is still positive (0.0085), indicating that the medium-term upward trend remains intact. The Relative Strength Index (RSI) is at 66.94, showing strong upward momentum. The Commodity Channel Index (CCI) is at 138.82, which has entered the overbought area, suggesting that there may be adjustment pressure in the short term.
If EUR/USD can hold the support level of 1.1050, the upward trend will continue. If it breaks through the 1.1150 level, it is expected to further test the psychological barrier of 1.1200. The trading volume has increased when breaking through the key resistance level, indicating that the bulls are dominating the market, which provides the necessary conditions for the subsequent upward movement. Considering the rising expectations of the Federal Reserve’s interest rate cut, the US dollar index is likely to continue to be under pressure, which will provide more support for the upward movement of EUR/USD.
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