EUR/USD Slides as Investors Await Fed Officials’ Remarks on Interest Rates and Economy

EUR/USD Highlights

• Euro falls, US Dollar rises due to Fed loans survey
• Federal Reserve’s Senior Loan Officer Opinion Survey shows credit tightening
• Investors await Fed officials’ remarks, CPI and PPI reports

EUR/USD Overview

On Tuesday, the Euro was sliding while the U.S. Dollar was gaining strength, following a loans survey that indicated U.S. credit conditions were not as dismal as anticipated. Trading activity was subdued as major market players awaited the release of the U.S. consumer price inflation report on Wednesday.

At 10:47 GMT, the EUR/USD was trading at 1.0980, reflecting a 0.22% decline or a decrease of 0.0025. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) closed at $101.56, registering a loss of $0.15 or 0.15%.

US Credit Conditions Tighten Due to Fed

The Federal Reserve’s quarterly Senior Loan Officer Opinion Survey, published on Sunday, showed that credit conditions for U.S. businesses and households had tightened at the start of the year. However, this was likely due to the Fed’s aggressive rate hikes rather than severe banking sector stress. The survey, which is closely watched by market participants, was among the first indicators of sentiment across the banking sector since Silicon Valley Bank’s collapse in March, which triggered a spate of bank failures.

Following the release of the survey, the U.S. dollar saw a modest increase as Treasury yields rose, as traders revised their expectations on the magnitude of Fed rate cuts required later in the year to ease the sector’s stress.

Investors Await Fed Officials’ Remarks on Economy

On Tuesday, U.S. Treasury yields are lower as investors awaited remarks from Federal Reserve officials, including Fed Governor Philip Jefferson and New York Fed President John Williams, for clues about the economy and monetary policy.

Investors will be closely monitoring their comments for insights into the central bank’s expectations for the U.S. economy and interest rate policy decisions. Additionally, investors are preparing for the release of the latest consumer and producer price index reports on Wednesday and Thursday, respectively. The data could provide indications about the Fed’s future policy moves, particularly regarding interest rates, which Fed Chairman Jerome Powell stated last week would depend on the data.

Fed Hints at End of Rate-Hiking

Following last week’s Fed meeting, which raised interest rates by 25 basis points, the central bank hinted that its rate-hiking campaign may be coming to an end. However, Powell stated that rate cuts are unlikely to be implemented soon, causing concerns that elevated rates may lead to a recession in the U.S. economy.

Technical Analysis

The EUR/USD is in a long-term uptrend. However, momentum is trending lower. The short-term weakness has put the Forex pair in a position to challenge the pivot at 1.0965. This level is controlling the short-term direction of the single-currency.

Since the main trend is up, buyers are likely to come in on a test of the pivot. This could lead to a shift in momentum to the upside.

Taking out the pivot at 1.0965 will be a sign of weakness. If this move is able to generate enough downside momentum then look for an eventual break into the nearest support at 1.0834 (S1).