EUR/USD Rebound Fizzles Ahead of 50-Day SMA

EUR/USD carves a series of lower highs and lows as it continues to pull back from the weekly high (0.9876), and the exchange rate may depreciate over the coming days as the rebound from the monthly low (0.9632) appears to have stalled ahead of the 50-Day SMA (0.9902).

The decline from the yearly high seems to have run its course as the Relative Strength Index reverses ahead of oversold territory, and EUR/USD may continue to trade to fresh weekly highs as the bearish momentum abates.

EUR/USD may mirror the price action from earlier this month as it struggles to test the moving average, and the exchange rate may continue to track the negative slope in the indicator as Federal Reserve officials plan to carry the hiking-cycle into 2023.

The update to the Euro-Area CPI may generate a bearish reaction in the EUR/USD as headline reading for inflation is expected to narrow to 8.2% from 8.6% per annum in January, and evidence of easing price pressures may push the ECB to adjust the forward guidance for monetary policy as board member Philip Lane acknowledges that the improvement in the energy price situation will in the near term lower inflation.

The next ECB meeting on 16th March even though the Governing Council is widely anticipated to implement another 50bp rate hike, but stickiness in underlying inflation may force the central bank to pursue a more restrictive policy as President Christine Lagarde insists that we will do more hikes if necessary.

A stronger than expected CPI print may fuel the recent rebound in EUR/USD as it fuels speculation for higher interest rates in the Euro Area, but the exchange rate may struggle to retain the rebound from the February low if it fails to push back above the 50-day SMA.

A move above the moving average opens up the 1.0880 to 1.0940 region, but EUR/USD may struggle to retain the rebound from the February low as the indicator no longer reflects a positive slope.

Failure to hold above 1.0610 may spur another run at the January low, with the next area of interest coming in around 1.0370.