The EUR/USD rally has lost momentum just below the January high of 1.0533, as the pair fails to sustain the series of higher highs and lows from the previous week. Traders are closely watching whether the U.S. dollar will strengthen further as the Federal Reserve maintains a cautious stance on monetary policy.
EUR/USD Retreats from Weekly High
The exchange rate dipped to a new weekly low of 1.0440, pulling the Relative Strength Index (RSI) back from its highest point since September. With the Federal Reserve meeting in March on the horizon, traders are analyzing Fed Governor Christopher Waller’s recent remarks favoring a pause in rate cuts. Speaking at the University of New South Wales Macroeconomic Workshop, Waller stated that maintaining the current policy rate is appropriate, as economic data does not yet justify a reduction.
Market Implications and Fed Policy Outlook
The continued resilience in employment could keep the Federal Reserve committed to its fight against inflation, reducing expectations for an imminent rate cut. As a result, EUR/USD may struggle to sustain its recent gains from the monthly low of 1.0211, especially as the Federal Open Market Committee (FOMC) signals a steady policy approach.
Given this, the failed attempt to breach the January high could keep EUR/USD confined within its yearly range. However, the current pullback might be temporary, as the pair appears less sensitive to the negative slope of the 50-Day Simple Moving Average (SMA) at 1.0394.
Key Technical Levels to Watch
- Downside Risks: If EUR/USD fails to hold above the 1.0448–1.0480 support zone (100% Fibonacci extension), it could decline toward 1.0370 (38.2% Fibonacci extension). A further slide may bring the 1.0200 level (23.6% Fibonacci retracement) into focus.
- Upside Potential: A break above the January high (1.0533) could open the door for a test of the 1.0580–1.0610 range, with the next key resistance near December’s high of 1.0630.
Additional Market Outlooks
- USD/CAD: The Canadian dollar remains steady despite CPI data, as trade tensions increase.
- Gold Prices: RSI signals potential selling pressure as gold loses momentum.
- GBP/USD: The British pound surpasses its January high, reinforcing its bullish trend.
- USD/JPY: The yen pulls back from its monthly high, ending a three-day winning streak.
Traders should closely monitor U.S. economic indicators and Fed commentary for further clues on the next directional move for EUR/USD.
