EUR/USD daily chart
The pair is now starting to crack under the 1.0800 mark in a firmer manner as we look towards European trading. The next key technical test will be the 100-day moving average (red line), seen at 1.0780 currently.
This comes as the dollar is keeping firmer across the board, extending gains from the post-Fed moves yesterday.
Looking at how things are playing out for EUR/USD, a divergence can be seen in terms of traders’ reaction to the central bank communication to start the year.
Powell was explicit and said that March is not likely the base case for rate cuts. As such, the odds of a rate cut for that declined from ~62% to ~35% now.
Meanwhile, the ECB continued to tip-toe around the timeline for a rate cut. The balance remains between April and June with policymakers not firming up any convictions still. And that is seeing traders still price in ~93% odds of a rate cut for April at the moment.
Going back to EUR/USD, the big test for the pair now comes from the key technical level noted above. A drop below the 100-day moving average will put sellers in prime position to chase the December low of 1.0723 next.
Once again, it looks like the narrative calling for the dollar’s demise will have to be pushed back.