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EURUSD: price action gropes for post-rally equilibrium

The EURUSD pair traded higher on Thursday, March 11, up 0.46% to 1.1984. The euro swung between gains and losses after the ECB meeting, but amid a weakening dollar, buyers mustered a rally to 1.1990.

At its meeting yesterday, the ECB held interest rates steady. The regulator said it would keep borrowing costs under control and purchase assets under its Pandemic Emergency Purchase Programme (PEPP) for a total of EUR 1.85 trln at least until at least the end of March 2022. The Governing Council expects PEPP purchases in Q2 to move forward at a significantly faster pace than in the first months of this year.

Todays macro agenda (GMT 3)

  • 10:00 UK: GDP, industrial production, manufacturing production, and balance of trade (January); Germany: CPI (February)
  • 13:00 Eurozone: industrial production (January)
  • 16:00 UK: BIESR GDP (February)
  • 16:30 Canada: unemployment rate and employment change (February), wholesale trade (January), capacity utilization (Q4); PPI (February)
  • 18:00 US: Reuters/Michigan consumer sentiment (March)
  • 21:00 US: Baker Hughes: weekly oil rig count

EURUSD: price action gropes for post-rally equilibrium

Current outlook

Major currencies have been trading in the red during Asian trading. The steepest losses against the US dollar have been seen by the franc (-0.46%), the New Zealand dollar (-0.38%) and the Australian dollar (-0.33%). Investors are bailing out of risk-sensitive assets amid a spike in US 10-year Treasury yields from 1.475% to 1.582%.  Notably, statements by Fed Chairman Jerome Powell and the US inflation report were not enough to halt the sell-off in sovereign bonds.

Today’s economic calendar is on the thin side, so the FX market will be driven by US10Y dynamics. At the time of writing, the euro was trading at 1.1948. The support zone is located between 1.1925-1.1935 (the 42-degree angle of the lower bound line, trendline). If this range fails to hold, the correction will pick up momentum to 1.1909 (about 50% of growth in the 1.1836 - 1.1990 range). The ideal scenario for Friday would be a correction to 1.1935, followed by a leg higher to 1.1970.

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