EUR/USD Continues Winning Streak Amidst USD Weakness As FOMC Minutes Disappoint

The EUR/USD pair continues to ride its winning streak, now extending for the seventh consecutive day, propelled by a weakening US Dollar in defiance of market expectations of sustained higher interest rates by the Federal Reserve. Despite the Fed's resolute stance on maintaining the status quo in its latest meeting minutes, the greenback struggles to regain ground, paving the way for the Euro's resurgence.
The release of the Federal Open Market Committee Minutes underscored policymakers' cautious stance regarding premature interest rate cuts, dismissing early easing prospects in forthcoming monetary gatherings. This sentiment, coupled with upbeat economic data from Germany and the Eurozone, acted as a tailwind for the common currency, amplifying its strength against the faltering dollar.
German Services PMI surpassed market projections, climbing to 48.2 in February, while Eurozone Services PMI surged to a reading of 50, defying expectations and signaling a potential recovery in the region's service sector. The convergence of positive data alongside the lack of a hawkish bias in the FOMC minutes catalyzed the rebound of the EUR/USD pair.
From a technical perspective, EURUSD broke through the bearish channel after consolidation near it for two days and tested the next important resistance zone near 1.09. However, the price met stiff resistance zero as indicated by the green candle with a long tail, which means the market isn’t ready to push higher yet and the pair is likely to remain range-bound in 1.08-1.09. The risks after the breakout of the channel, which likely slammed bearish, sentiment are skewed towards further upside, but the pair should accumulate some force for that. The next important resistance level will be located near the 1.10, where the major downtrend channel line is located:

Attention now pivots towards the United States, where investors eagerly await the release of S&P Global PMI figures, weekly Initial Jobless Claims, and Existing Home Sales data during the North American session. Market participants seek further insights into the trajectory of the US economy amidst lingering concerns over inflation and employment dynamics.
S&P's analysis of the FOMC minutes aligns with market sentiment, projecting a continued cooling of inflation in the coming months amid persistent disinflationary pressures. Despite uneven trends, S&P maintains its outlook for monetary policy in 2024, forecasting no deviations from the current stance. However, they anticipate a 25 basis point reduction in the policy rate during the June meeting, with additional cuts totaling 75 basis points by year-end.
Richmond Federal Reserve Bank President Thomas Barkin provided insights into the US economic landscape, acknowledging progress towards a soft landing while cautioning about lingering challenges. Barkin highlighted positive indicators in inflation and employment but expressed concerns over recent fluctuations in producer and consumer price indices, suggesting a reliance on disinflationary forces from goods. The duration until resolution remains a pivotal question.
Meanwhile, the CME FedWatch Tool reflects shifting market expectations, with a notable decrease in the probability of a rate cut for March and May, standing at 4.5% and 29.8%, respectively. While the likelihood of a June rate cut slightly recedes, July sees an uptick in probability, indicating evolving perceptions regarding the Fed's future policy trajectory.
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