• Powell’s speech lacked indications of when rate cuts would begin.

• The Bank of America revised its outlook and expects the first Fed cut in December or later.

• Eurozone inflation is on a clear path to the 2% target.

A hint of bullish sentiment emerges in the EUR/USD forecast as the dollar takes a step back following a robust rally. Yet, amidst this glimmer of optimism, Euro bears stand firm, with economic indicators signaling further downward pressure.

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Notably, the dollar rose Tuesday as Fed policymakers sounded more hawkish, pushing back rate cut expectations. Investors paid close attention to Powell’s speech, which lacked indications of when rate cuts would begin. Moreover, the Federal Reserve’s Chair said the US needs a restrictive monetary policy for a bit longer.

These recent remarks came after the US retail sales report, which pointed to robust consumer spending. Incoming data has completely changed the outlook for interest rates in the US. Notably, the Bank of America revised its outlook and expects the first Fed cut in December or later. At the same time, investors are betting on September for the start of rate cuts.

This is the complete opposite of the Eurozone. On Tuesday, ECB policymakers continued supporting the first cut in June. Unlike the US, Eurozone inflation is on a clear path to the 2% target. Moreover, the economy is slowing down. Therefore, nothing is holding the ECB back.

If the ECB cuts in June, it will be well ahead of the Fed. Furthermore, market participants expect 77bps in cuts in the Eurozone. This is much bigger than the 40bps expected in the US. This divergence will likely keep the EUR/USD pair on a strong downtrend.

EUR/USD key events today

Investors are not expecting any volatility today, as neither the US nor the Eurozone will release major economic reports.

EUR/USD technical forecast: Decline pauses as bears get exhausted

On the technical side, the bias for the EUR/USD pair is bearish. However, the decline has paused at a major support zone comprising the 1.618 Fib extension and 1.0600 key support levels.

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Moreover, the RSI showed a bullish divergence in the oversold region, indicating exhaustion in the downtrend. Therefore, there is a high chance that bulls will prompt a retest of the 30-SMA. The price might even rise to retest the 1.0600 key level before continuing lower.

https://www.forexcrunch.com/blog/2024/04/17/eur-usd-forecast-dollar-eases-after-impressive-surge/