As the EUR/USD chart shows at the start of the European session today, the exchange rate has dropped below EUR 1.08 per US dollar.
Tuesday’s news contributed to this. According to Nasdaq.com, on March 26, 2024, The Conference Board published a report for March, according to which the CB Consumer Confidence index of consumer confidence dropped sharply: fact = 104.7; forecast = 107.0; previous value = 106.7. Comments followed: “Consumers remain concerned about increased price levels, which dominates the responses. March written responses showed growing concerns about food and gasoline prices.”
As a result, the US dollar strengthened (as shown by arrow No. 1). After all, if the published data give grounds to assess inflation as high, then the Fed’s tough policy may last longer.
Today’s decline reflects a rebalancing in market sentiment.
Fed spokesman Christopher Waller added doubts about easing monetary policy yesterday, saying that the economy does not require a dramatic reduction in rates, so the Fed is in no hurry.
Could the US dollar strengthen further against the euro?
This prospect is supported by the assumption that medium-term traders who opened long positions on March 20 in response to the growth of EUR/USD (shown by arrow No. 2) are now actively closing positions, creating additional pressure.
Technical analysis of EUR/USD provides another argument: the increase in B→C stopped at the Fibonacci level of 0.382, formed from the decline in A→B. Thus, according to wave theory and Fibonacci proportions, the current decline may reach the level of 1.618, which approximately corresponds to the 2024 low.
Euro bulls have enough reasons to be cautious.
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