EURUSD declines due to stronger dollar amid new Fed and ECB decisions

The EURUSD currency pair is showing a downtrend this week as the dollar has strengthened on the background of the US Federal Reserve (Fed) revising the timing of monetary policy easing.

Investors will be keeping a close eye on several indicators this week, starting with the manufacturing PMI. PMIs will be published today. This will be followed by the release of preliminary estimates of GDP for the fourth quarter on Thursday and Personal Consumption Expenditures data on Friday.

Last week, Fed officials said they needed more inflation data to make a decision on rate cuts that are expected in the third quarter.

Traders are pricing in the value of the U.S. dollar with a forecast of five rate cuts of a quarter percentage point each in 2024. That is down from six cuts suggested two weeks ago. According to LSEG's interest-rate probability app IRPR, the Fed's first cut, previously expected in March, is now likely to take place in May with an 89% probability.

The European Central Bank (ECB) will also announce its monetary policy decision on Thursday. Markets expect rates to remain at 4.5%. Investors will also be closely watching ECB Chair Christine Lagarde's press conference for any clues on the future direction of interest rates.

EURUSD quotes have broken out of the uptrend on the H4 timeframe. In terms of wave analysis, the price is forming the third downward wave. Breaking through the top of the first wave at the level of 1.0893 has already taken place. The downward movement may intensify in the near term.

Signal:

The short-term outlook for the EURUSD pair suggests selling. 

The target is at the level of 1.0650.

Part of the profit should be taken near the level of 1.0770.

A stop-loss could be set at the level of 1.1020.

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.