After experiencing a significant surge of 500 pips, the EUR/USD pair has settled into a period of stagnation, awaiting further news. Last week, buyers attempted to consolidate the pair within the 1.0900 range but ultimately failed. Sellers took control and pushed the price down to a low of 1.0806. Although the week concluded with the EUR/USD buyers making some gains, the upward trend has clearly lost momentum.
Let me remind you that the currency pair has increased by more than 500 pips amidst growing concerns that the U.S. economy could slide into recession. In particular, JPMorgan Chief Economist Bruce Kasman stated that the probability of this scenario occurring this year is about 40%, up from an initial estimate of 30% at the beginning of the year. He noted that the risk of recession will rise to "50% or higher" if the mutual tariffs that Trump threatens to impose starting in April actually come into effect.
The U.S. Federal Reserve will summarize the results of its next meeting on March 19, which may heighten concerns about this situation. Therefore, all EUR/USD traders will be focused on the March meeting of the US central bank, even though the formal outcomes have already been largely determined. Nonetheless, the economic calendar for the coming week is filled with other significant events.
Monday
During the Asian session on Monday, a block of important macroeconomic data will be released in China. Specifically, we will learn about the growth dynamics of industrial production. Forecasts suggest that production in February will grow by only 5.3%, down from a 6.2% growth in the previous month. However, retail sales are expected to increase by 3.8%, which would be the highest value since October of last year. If the Chinese reports are favorable, the dollar may come under pressure due to increased interest in riskier assets.
During the American session on Monday, the United States will publish data on retail sales. The results for January were quite disappointing, as the figures unexpectedly fell into negative territory, indicating a decline in consumer activity. Preliminary forecasts suggest that retail sales will increase by 0.7% in February (excluding auto sales, the increase is expected to be 0.4%).
Additionally, on Monday, the NY Empire State Manufacturing Activity Index will be released. After increasing by 5.7 points in February, a sharp decline is anticipated for March, dropping to -1.9.
Tuesday
On Tuesday, several key macroeconomic reports will be released in the US.
First, we will see the import price index, which serves as an early indicator of changes in inflation trends. This month, the index is expected to decline sharply to -0.1%, following two months of growth. On an annual basis, the rate is anticipated to slow to 1.4%. This means that import prices are likely to confirm the trends indicated by other inflation metrics, such as the core PCE index, CPI, and PPI.
Second, data on the volume of building permits issued in the US will be published. After minimal growth of 0.1% in January, this indicator may return to negative territory with a forecast of -0.4%.
Lastly, we will learn about the volume of industrial production in the US for February. A downward trend is expected; growth was recorded at 1.0% in December, 0.5% in January, and only 0.2% is projected for February.
Wednesday
Wednesday is arguably the most important day of the week. At the conclusion of its two-day meeting, the US Fed will announce its decisions. It is important to note that the results of the March meeting are widely expected to be consistent with previous policy settings, as there is a 98% probability, according to the CME FedWatch tool, that the Fed will maintain its current monetary policy parameters. As a result, all eyes will be on the accompanying statement, Jerome Powell's commentary, and the updated economic forecasts. Market participants are particularly interested in the potential for the resumption of interest rate cuts.
The CME FedWatch also indicates a 30% chance of a rate cut at the May meeting. Meanwhile, the market is almost certain that the central bank will ease monetary policy in June, with the probability of a rate cut then approaching 80%.
The Fed's rhetoric could significantly influence market sentiment. For instance, if the Fed suggests that a rate cut in May is possible, the dollar might come under severe pressure since the market currently does not anticipate such a scenario.
Additionally, the market will be focused on the updated Fed forecasts, which could heighten concerns about a potential recession in the United States this year. Former New York Fed Chairman William Dudley has indicated that forecasts for industrial production growth may be substantially reduced, while inflation forecasts could be raised. It is likely that the median forecast will still include two rate cuts of 25 basis points each this year. However, some analysts believe the dot plot forecast may be adjusted to reflect a more dovish stance, potentially indicating three rounds of 25-point rate cuts.
Thursday
On this day, the EUR/USD pair is likely to continue trading based on the momentum from the previous day's activity as it "digests" the outcomes of the March Fed meeting. Additionally, several secondary macroeconomic reports will be released on Thursday.
One key report will detail the weekly data on initial applications for unemployment benefits. Following a slight decrease to 220,000, a modest increase is anticipated, bringing the total to 222,000, similar to the figures from the week before last. The impact on the EUR/USD pair will be significant only if the actual results deviate considerably from the forecast.
Another important release on Thursday will be the Philadelphia Fed manufacturing activity index. In January, this index stood at 44.3 points, while in February, it dropped to 18.1 points. A further decline is expected in March, with the index projecting a decrease to 12.1 points.
Lastly, the volume of housing sales in the secondary market in the U.S. will also be reported. This indicator is expected to show negative dynamics as well; after a decline of 4.9% in January, another decrease of 5.1% is anticipated for February.
Friday
The economic calendar for Friday is relatively sparse for EUR/USD traders. The main point of interest is a speech by John Williams, the head of the Federal Reserve Bank of New York. In his remarks from early March, he noted that there was "no evidence that inflation expectations are encountering any difficulties." On Friday, he will have the opportunity to comment on the latest macroeconomic reports as well as the results of the March Fed meeting.
Technique
From a technical perspective, the EUR/USD pair is currently situated at the middle line of the Bollinger Bands indicator (1.0880). This level coincides with the Tenkan-sen and Kijun-sen lines, and it is positioned above the Kumo cloud. Sellers have attempted multiple times to maintain a position below this support level, but these efforts have been unsuccessful.
On the daily chart, the pair remains between the middle and upper lines of the Bollinger Bands indicator, and it is also above all the lines of the Ichimoku indicator, including the Kumo cloud. This analysis suggests a preference for long positions. The first target to watch for is the 1.0930 mark (the upper line of the Bollinger Bands on the four-hour chart), while the main target is 1.0980 (the upper line of the Bollinger Bands on the daily chart).
