Today, the Eurodollar saw increased volatility following the release of data from the Eurozone economy. The euro weakens after data indicated that preliminary eurozone CPI inflation for March came in below expectations at 2.4% versus 2.5% forecasts. The core CPI also settled below the 3% estimate, and the unemployment rate rose 0.1% to 6.5%. Overall, the data suggest an economic slowdown in Europe, and dovish comments from the ECB's Holzmann, indicate that keeping the ECB deposit rate above 3% may prove too restrictive given the current economic climate. Data from the U.S. continues to perform very solidly against the eurozone, and today the gap is likely to be widened when we learn ISM service sector data (3 PM GMT) and the ADP report from the U.S. private labor market (1:15 PM GMT). In both cases, the market expects readings slightly better than in February. A strong ADP employment change and ISM above 53 points could strengthen the dollar and put downward pressure on EURUSD. In addition, as many as 5 members of the Federal Reserve will speak today, including Jerome Powell (5:10 PM GMT)
EURUSD (D1 interval)
Eurodollar slipped below key support of SMA200 (red line), first time since August 2023. Real transaction volume show higher selling activity and if the pair will fail to increase above 1,08 where now we can see the most important resistance zone (SMA200, trend line), the pair may test even 1,06 levels. The pair is also trading in a potential head and shoulders bearish technical pattern, where a sustained loss of 1.08 could impose additional pressure from the technical side. In an extreme scenario, even testing 1.02 is not out of the question, but a more severe recession in Europe would be key to realizing such a big drop, with the US economy still very solid and the Fed delaying rate cuts.
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Source: xStation5
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