EUR/USD, EUR/CHF outlook: Currency Pairs of the Week – March 25, 2024

• EUR/USD outlook: What will traders be watching this week?
• EUR/CHF is a more interesting euro pair to watch
• EUR/USD technical outlook

The major currency pairs like the EUR/USD may be in for a quieter week following last week’s central bank bonanza. Much will depend on whether the US dollar will be able to hold onto its recent gains. Meanwhile, among the more technical-friendly pairs to watch is the EUR/CHF pair, which has cleared a major resistance zone following the Swiss National Bank’s surprise rate cut last week. More on this later. The EUR/USD itself will be in focus as traders wonder whether Friday’s breakdown below the 200-day average was a temporary move, or one that has legs.

EUR/USD outlook: What will traders be watching this week?

A lot will depend on the direction of the US dollar this week, which will be tested with the release of the Fed’s favourite inflation measure on Friday, and some FedSpeak throughout the week.

Friday's key release is the US core PCE deflator for February amid a consensus for a 0.3% month-on-month reading, likely falling short of the Fed's disinflation narrative. Fed speakers include Christopher Waller on Wednesday and Chair Jerome Powell on Friday. Let’s see if they will address those strong early-year inflation prints and dismiss them again. In any case, I think the US dollar will struggle to keep pushing higher as we go deeper into the year, now that the Fed is getting ready to cut rates.

From the Eurozone, there isn’t much in the way of key data this week, but we do have some more German data that, on the whole, could provide us further indication about the health of the Eurozone largest economy. Among them, we have German GfK Consumer Climate on Tuesday and retail sales on Thursday.

Last week saw the German Ifo survey come in ahead of expectations and showed its highest reading in 10 months. Following a rather harrowing year for the German economy in 2023, each positive data point from here on ought to be celebrated by euro traders. The Ifo index stands is a positive development, albeit much more is requisite to elevate the economy from its current nadir to a state of recovery.

EUR/USD outlook: US dollar may ease back

Last week, the US dollar rose, even though the Fed was dovish as the FOMC maintained its projections of 3 rate cuts this year. Part of its support stemmed from increasingly dovish external factors, including the Swiss National Bank's surprise rate cut, as well as accommodative stances from the Bank of England and Reserve Bank of Australia. Declines in the pound, franc, euro and the Aussie dollar further bolstered the dollar's recent rise, alongside encouraging US economic indicators such as PMIs, existing home sales, and unemployment claims. However, these macroeconomic releases are unlikely to deter the Fed from contemplating rate cuts in June, especially amidst subdued inflation.

After this week’s PCE inflation data, attention will turn to the Non-Farm Payrolls report and Consumer Price Index data in subsequent weeks. The March US data set for release in early April holds considerable sway over the dollar's trajectory. Weakness in these figures, particularly forthcoming inflation data, could precipitate a sustained decline in the dollar.

EUR/USD technical outlook

The EUR/USD has managed to rebound after breaking below the 200-day average (1.0835) on Friday. Let’s see if it will be able to reclaim the 200-day again. It would be a bullish outcome if it does.  If so, what the bulls need to see for confirmation is a break above the bearish trend line which comes in at around 1.0925 to 1.0950 area.

On the downside, 1.0795 is now the key level to watch. This was the most recent low that was formed at the end of last month. Ideally, the bulls will not want to see price go back below this level now. However, a clean break below this level could potentially pave the way for a larger drop towards 1.0700.

EUR/CHF technical analysis

As mentioned, the EUR/CHF is probably a far more interesting euro cross to watch than the EUR/USD. This is because the Swiss National Bank surprised the markets last week by cutting interest rates unexpectedly, becoming the first the first major central bank to do so. As a result, the EUR/CHF rallied breaking above key resistance area in the 0.9680 to 0.9694 region where it had previously found strong resistance on multiple occasions and Q4.

The area between the 0.9694 to 0.9680 broken resistance levels is now the most important support zone to watch on any short-term dips. This week the EUR/CHF has already tested this region and has bounced. For as long as this area remains intact, the path of least resistance will be to the upside. From here, last week's high at 0.9788 is now going to be the next short-term upside objective followed by round levels like 0.9800, 0.9900 and potentially parity thereafter.

However, if the above-mentioned support area breaks down then this could pave the way for a drop towards 0.9630 initially ahead of the 200-day moving average at around 0.9550 area next.

Source for all charts used in this article: TradingView.com.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R