This series of fundamental events will guarantee volatility in the EUR/USD pair. Therefore, traders have a chance to escape the flat market, either moving towards the ninth figure (with a target of 1.1000) or back to the seventh figure. We will not be bored, there is no doubt about that.
Monday
On the first working day, the Sentix investor confidence indicator will be published, showing investors' confidence in the eurozone economy. Since March 2022, it has been in negative territory, signaling pessimism among investors. However, since November 2023, the indicator has shown an upward trend, and according to forecasts, this trend will continue in March: the index is expected to reach -10 points (for comparison, in October, it was at -21.9 points).
During the US trading session, the President of the Federal Reserve Bank of Philadelphia, Patrick Harker, is scheduled to speak. Not long ago, at the end of February, he made an interesting statement. He allowed for a rate cut as early as the May meeting. But he also needs more data to form a position on this issue. Since then, several important reports have been published, among which are the core PCE index for January (reflecting a slowdown in inflation) and the ISM manufacturing index (unexpectedly dropped to 47 points). If, against the backdrop of these releases, Harker again talks about the prospects of a May rate cut, the dollar may come under slight pressure (the President of the Federal Reserve Bank of Philadelphia does not have voting rights this year).
Tuesday
On Tuesday, the final estimates of the European PMI indices for February will be published. According to forecasts, the initial estimate will coincide with the final one, so this release is likely to be ignored by the market.
The most interesting events on Tuesday will occur during the US session. In particular, we will learn the February value of the ISM Non-Manufacturing Purchasing Managers' Index. According to forecasts, the indicator should remain in the expansion zone, i.e., above the 50-point mark, but at the same time, it is expected to show a downward trend, dropping to 52.9, after the January result of 53.4. Recall that the ISM manufacturing index entered the red zone last week, exerting significant pressure on the dollar. Essentially, this report made it possible for the bulls to take the initiative on Friday and finish the trading week at 1.0840.
Another important event is the speech of Fed Board member Michael Barr. At the end of February, he already expressed his opinion, which boils down to maintaining a wait-and-see position. He noted that he needs to see sustained good data before advocating for a rate cut, while the January CPI growth report "reminds us that the path to 2% inflation will be uneven." It can be assumed that on Tuesday, he will articulate similar theses, lending support to the greenback.
Wednesday
The head of the Fed will start his two-day testimony in the U.S. Congress. Initially, he will present the semi-annual monetary policy report to the House Financial Services Committee, and the next day (Thursday) – to the Senate Banking, Housing, and Urban Affairs Committee. Given the importance of this event for EUR/USD traders, all other fundamental factors will take a back seat.
Market participants are primarily interested in his assessment of the recent reports in the context of the prospects for monetary easing. Recall that most of the data published last week were not in favor of the greenback. Instead of the expected rise to almost 115 points, the consumer confidence index fell to 106 points; the estimate of U.S. GDP growth in the fourth quarter was revised down to 3.2% (initial estimate – 3.3%); the volume of pending home sales in the U.S. decreased by 4.9% (month-on-month). And this is without mentioning the aforementioned ISM manufacturing index and the core PCE index.
At the moment, market participants are nearly certain that the Fed will maintain the current stance in March and May. As for the June meeting, it's a 50/50 chance. Powell is unlikely to shift market expectations for the spring meetings but could either strengthen or weaken the dovish sentiment regarding June prospects. The market will either adjust its expectations to July/September or increase the likelihood of the Fed taking the first step in rate cuts as early as June.
Thursday
The ECB will announce the results of its March meeting. There is no doubt that the ECB will maintain a wait-and-see position. Such an outcome has long been priced in by the market and will not make any impression. Only the further prospects are of interest.
Recently, the rhetoric of ECB members has softened. If at the beginning of the year, most of them talked about maintaining the status quo with an "open date," now the date of the first round of rate cuts is being discussed. Often, June is mentioned. Members of the ECB's Governing Council, including Peter Kazimir and Yannis Stournaras, have spoken about this date. Many ECB representatives did not say directly but hinted at June prospects, including ECB President Christine Lagarde when she said that recent wage data is "encouraging" (wage growth in the eurozone slowed to 4.5% in the fourth quarter). According to her, if the downward trend continues this year, it will be a "determining factor." Given that figures for the first quarter of 2024 will be published in May, the ECB could well cut rates at the June meeting (assuming conducive conditions).
In my opinion, the outcomes of the ECB's March meeting will not work in favor of the euro: dovish signals will exert pressure on the single currency.
Friday
On the last trading day of the week, the US will release key labor market data for February. According to preliminary forecasts, the unemployment rate in the US will remain at 3.7%. The number of non-farm payrolls is expected to increase by 190,000, significantly lower than January (353,000) and December (333,000). The average hourly earnings in February are expected to grow by 4.4% (January was 4.5%).
Last month, Nonfarm Payrolls surprised market participants with a "green tint": despite modest expectations, the data showed a strong result. If February Nonfarm Payrolls also end up in the "green," the dollar will receive substantial support. Such a result would indicate that the US labor market is not cooling off but, on the contrary, is heating up.
Conclusions
With a high probability, we can assume that by the end of the upcoming week, the EUR/USD pair will exit the 8th figure range. Especially if key events of the week resonate: the ECB demonstrates a dovish position, while Powell advocates maintaining the status quo (additional support could come from Nonfarm Payrolls if it ends up in the green).
You may consider long positions after the pair consolidates above the resistance level of 1.0890 (the lower boundary of the Kumo cloud on the daily chart). Short positions after the pair consolidates below the target of 1.0780 (the middle line of the Bollinger Bands on the same timeframe).Pentru mai multe detalii, va invitam sa vizitati stirea originala.
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