Last week, the Federal Reserve held its March meeting of the Federal Open Market Committee along with a press conference, releasing the latest economic forecasts. The major U.S. stock indices collectively rose. Due to optimistic U.S. economic prospects and robust existing home sales data, the dollar strengthened, with the dollar index hitting a monthly high of 104.49. While the Bank of Japan ended its negative interest rate policy, the yen fell in response. Gold hit a historic high last week, reaching $2,223, with the possibility of a ceasefire in Gaza weakening oil trends. As enthusiasm for a Bitcoin spot ETF cooled in the market, Bitcoin prices fell over 10% from their all-time high.

Major central banks worldwide, including the Bank of Japan, the Swiss National Bank, and the Bank of England, held policy meetings. On Tuesday (the 19th), the Bank of Japan announced a 10-basis-point hike in short-term rates, marking its first rate hike in 17 years and officially exiting the "negative interest rate" policy regime.

Switzerland initiated a rate-cut cycle, reducing its benchmark rate from 1.75% to 1.5%, becoming the first developed economy in the G10 to cut rates after a prolonged period of high inflation. As inflation in the UK slowed but remained elevated, the Bank of England followed the Federal Reserve's lead, keeping its key rate at 5.25%. With inflationary pressures easing further, rate cuts are expected later this year.

As expected by the market, the Federal Reserve kept the federal funds rate unchanged at 5.25%-5.5%, with the updated dot plot still indicating three rate cuts this year and an expected gradual increase in the federal funds rate to around 3.1% by 2026.

U.S. Treasuries rose for the fourth consecutive day, causing the 10-year Treasury yield to fall by nearly 10 basis points since Monday.

Overall, the market welcomed the more dovish messages from the Federal Reserve and Chairman Jerome Powell. The U.S. stock market hit new highs, with mixed results in the major indices at Friday's close: the Nasdaq rose by 0.16%, continuing to set new closing highs, up 2.85% for the week; the Dow fell by 0.77%, up 1.96% for the week; the S&P 500 fell by 0.14%, up 2.29% for the week.

In terms of precious metals, gold hit a historic high last week. However, gold prices may experience a healthy correction this week and in the short term. Following the Federal Reserve's decision to "stand pat" as scheduled, gold rose to a historic high of over $2,223 per ounce. It is expected that gold prices will ultimately rise before the Federal Reserve's June monetary policy meeting, but a short-term correction may occur. Investors should exercise caution in chasing prices close to historic highs. As for silver, it surged nearly 3% to a four-month high of $25.77 last week but turned lower in the latter half of the week, reaching a low of $24.40, the lowest in a week and a half. Platinum remained stable above the $880-$890 support level, with traders focusing on the upcoming Federal Reserve decision. If it breaks below $880, platinum may gain additional downward momentum.

In the currency market, the dollar index steadily rose, breaking through key support levels, and is expected to rise by 1.5% compared to two weeks ago this week. It is noteworthy that the sustained rise of the dollar may require a stock market correction, stimulating demand for safe-haven assets, while signs of weakness in foreign economies may also play a role.

Despite the Bank of Japan's rate hike, the yen continued to decline, hitting its lowest level in thirty years. The market seemed disappointed as the Bank of Japan did not send any clear signals about future rate hikes. The euro suffered heavy losses due to disappointing business surveys, touching a three-week low as the dollar strengthened. After the Bank of England gently opened the door to summer rate cuts, the pound plummeted. The Swiss franc was the best-performing G10 currency in 2023, falling by about 1.7% this week and about 6.8% year-to-date.

The possibility of a ceasefire in Gaza weakened oil trends, with oil prices closing largely unchanged last week. Stronger prospects for the U.S. economy supported dollar buying, making oil more expensive for investors holding other currencies.

Bitcoin prices have fallen by over 10% from their all-time high. This downward trend may continue. Bitcoin prices briefly fell to an intraday low of $62,570, below the level before the long-awaited Bitcoin halving event, weakening the bullish momentum that drove Bitcoin to a historic high of $73,835 on March 14. In addition to the continued outflow of Bitcoin ETFs affecting Bitcoin prices, the strengthening of the dollar is another key factor.

Outlook for this week:

With the widespread decline in U.S. Treasury yields, the dollar ended its second consecutive week of gains, reclaiming the area above 104.00 and maintaining the risk compound under further pressure. The Federal Reserve and the Bank of England have adopted dovish stances, while the Bank of Japan has proposed a dovish rate hike (the first in 17 years).

The relatively dovish assessment of inflation data and the March meeting of the Federal Open Market Committee and Federal Reserve Chairman Jerome Powell have revitalized market confidence that the Federal Reserve is likely to make substantial rate cuts starting from the June FOMC meeting. Undoubtedly, the market will hear more voices from individual FOMC members on the risks surrounding the core view of three 25-basis-point rate cuts by the Federal Reserve this year and three rate cuts in 2025.

The market is monitoring inflation and economic conditions in the eurozone to infer the timing of rate cuts by the European Central Bank. Currently, there is still a gap between the market's rate cut expectations and those of the ECB. As expected by the market, the ECB maintained its interest rate at the monthly meeting, with President Lagarde stating that the ECB Governing Council believes it is too early to discuss rate cuts, but at the same time, she also maintained comments suggesting that rate cuts may occur in the summer. It is believed that the short-term market is still in a period of adjustment regarding the timing of rate cuts, and whether inflation will further fall to the central bank's target remains a key factor in rate cuts.

The Bank of England kept its benchmark rate unchanged at 5.25%. The rate statement removed milestones regarding further tightening of monetary policy, suggesting that the rate hike cycle has ended. The strict guidance on rate cuts is consistent with that of the Federal Reserve and the European Central Bank. The UK government announced a series of tax cuts in its March Spring Budget to boost public support. The combination of monetary and fiscal easing will boost the next phase of the UK economy.

Overall demand in China remains low, highlighting the central bank's willingness to cut reserve requirements and intensify macroeconomic policy efforts. The central bank announced a 0.5-percentage-point reduction in reserve requirements at the beginning of the year, releasing long-term funds of about 1 trillion yuan, reflecting the central bank's intention to strengthen expected average management. The China Banking and Insurance Regulatory Commission and the Ministry of Housing and Urban-Rural Development respectively held meetings to fully promote the relevant work of the urban real estate financing coordination mechanism.

Overview of Important Events and Economic Data for the Week: (Beijing Time)

Monday (March 25th): Bank of Japan releases minutes of January monetary policy meeting; Federal Reserve Governor Lael Brainard speaks on the dual mandate of the Federal Reserve.

Tuesday (March 26th): Boao Forum for Asia Annual Conference 2024 takes place in Boao, Hainan, China from March 26th to 29th.

Wednesday (March 27th): Bank of Japan Policy Board member Naotaka Nomura delivers a speech; Bank of England publishes minutes of the Monetary Policy Committee meeting.

Thursday (March 28th): Federal Reserve Governor Michelle Bowman speaks on economic outlook; Bank of Japan releases summary of opinions from January monetary policy meeting.

Friday (March 29th): Federal Reserve Chair Jerome Powell speaks at an event hosted by the Federal Reserve Bank of San Francisco on "Macroeconomic Developments and Monetary Policy."

Economic Data Overview:

Monday (March 25th): UK CBI Retail Sales Balance for March; US February Seasonally Adjusted New Home Sales Annualized (in thousands); US February Building Permits MoM (revised %).

Tuesday (March 26th): Germany Gfk Consumer Confidence Index for April; US February Durable Goods Orders MoM (preliminary %); US Conference Board Consumer Confidence Index for March.

Wednesday (March 27th): Australia CPI YoY (seasonally adjusted) for February; Eurozone Economic Sentiment Indicator for March; Eurozone Consumer Confidence Index (final) for March; US EIA Crude Oil Inventories Change (in thousands of barrels) for the week ending March 22nd; Eurozone Consumer Confidence Index (preliminary) for March.

Thursday (March 28th): Germany Retail Sales MoM/YoY for February; UK GDP YoY (Gross Domestic Product using production approach) for Q4 (final %); US GDP Annualized QoQ (Gross Domestic Product) for Q4 (final %); US Core PCE Price Index Annualized QoQ (Personal Consumption Expenditures Price Index excluding food and energy) for Q4 (final %); US Initial Jobless Claims (in thousands) for the week ending March 23rd; US University of Michigan Consumer Sentiment Index (final) for March.

Friday (March 29th): Japan Tokyo CPI YoY for March; Japan Unemployment Rate for February; US Personal Consumption Expenditures Price Index YoY for February; US Core Personal Consumption Expenditures Price Index YoY for February; US Wholesale Inventories MoM (preliminary %) for February.

US Dollar Index:

The USD traded within a relatively narrow range in the short term.

Last week, the USD initially faltered after the Federal Reserve decision but rebounded significantly, reclaiming a one-month high of 104.49. The possibility of interest rate cuts in 2024 still exists, which would favor the USD, though there won't likely be significant changes: the date for the first rate cut has shifted back from July to June, and it's likely to persist, although the Fed will continue to rely on data. In the long run, interest rates may be higher than previously assumed, which would be more favorable for the USD. Following unexpectedly positive economic data this week, the market seems to share this view. Additionally, it's now difficult for the Fed to unexpectedly lean dovish again, and the market is already looking ahead to June unless data collapses in the coming weeks and advocates for earlier rate cuts, which seems unrealistic to the market. However, if inflation remains high after the first two months of this year, meaning if the "bump" turns into a plateau, rate cuts in 2024 could still be on the table, which would favor the USD. The price action of the USD continues to indicate that it's likely to remain within a relatively narrow trading range. The USD Index will likely stay within the trading range of 102.00-105.00.

The USD Index certainly believes that there has been a 180-degree shift in the market after the Fed meeting, which has been frantic. While the dot plot from last Wednesday still shows Fed officials expecting three rate cuts this year, the market expects only two, and later in the year. After hitting a new high for March of 104.49 last weekend, the USD Index is marching towards the February high. On the upside, 104.62 (61.8% Fibonacci retracement level from 107.11 to 100.61) remains the first level. Once surpassed, the February peak of 104.97 will come into play before the 105.00 area, with the next resistance at 105.57 (76.4% Fibonacci retracement level). Meanwhile, support is emerging for 103.86 (50.0% Fibonacci retracement level) and the 200-day moving average at 103.70, showcasing their significance. The psychological level of 103.00 still seems unchallenged, as the downtrend from the Fed meeting reversed before reaching this figure.

Conclusion for this week: Like the Fed, investors only become wiser with time. Hence, the market awaits data in the coming weeks and comments from FOMC members. However, investors may also prepare for the "bumpy road" of the USD.

Weekly range: 103.48 — 105.00.

Strategy for this week: Selling the USD Index on rallies is recommended.

WTI Crude Oil:

The International Energy Agency (IEA) has revised upwards the 2024 oil demand growth.

Last week, the price of US WTI crude oil tested highs not seen since November last year, reaching $83.01, but faced some selling pressure for three consecutive days. US Secretary of State Antony Blinken stated that the ongoing negotiations aimed at achieving a ceasefire in Gaza and releasing hostages were narrowing differences, alleviating concerns about interruptions in Middle Eastern supplies. Additionally, some follow-up USD buying support due to optimistic US economic prospects became a key factor exerting downward pressure on USD-denominated commodities, including oil prices. However, concerns about global supply tightening seem to have cushioned the downward trend. Attacks by Ukrainian drones on Russian refineries could lead to a decrease in fuel production. Prior to this, OPEC+ member countries decided to extend the daily production cut of 2.2 million barrels into the second quarter, and the IEA revised upwards the 2024 oil demand growth. Furthermore, strong US economic growth and the potential recovery in China have increased expectations of supply tightening. This could serve as a tailwind for oil prices and keep bearish traders cautious.

From the daily chart, the price of WTI crude oil fell back from the four-month high of $83.01 last week to $82.34 (upper Bollinger Band) and $80.20 (last week's low) support area before a slight rebound, currently hovering above $80.00. At this moment, although oil prices experienced a pullback in the latter part of last week, the trend has slowed down since then, but there still seems to be a chance for a retest of the $85.00 level, which has been a resistance level until recently since December last year. Before reaching the aforementioned $85.00 level, investors will first focus on the $82.34 level (upper Bollinger Band) and the $84.00 level (61.8% Fibonacci retracement level from $93.94 to $67.94). Currently, oil prices remain above the 300-day moving average of $78.33. Once support below the 300-day moving average is breached, the next level to watch would be $77.87 (38.2% Fibonacci retracement level from $93.94 to $67.94), but a bullish crossover may be needed to strengthen bullish sentiment.

Conclusion for this week: WTI crude oil prices are entering dynamics not seen since 2013 when a significantly weaker USD provided room for oil prices to rise to $100. Considering the current rate cuts and dovish stance of the Federal Reserve, more upside potential may be on the horizon. Although $100 is still far away, opportunities are increasing.

Weekly range: $78.33—$84.00.

Strategy for this week: Buying WTI crude oil on dips is advisable.

XAUUSD

Last week saw a strengthening US dollar and significant selling pressure on precious metals.

The price of gold retraced from the historic high of $2,223 reached during early Asian trading on Thursday of last week. However, amidst the continued weakness in the US dollar and US Treasury bond yields, gold prices temporarily held above the $2,200 threshold. The market digested the dovish decision of the Federal Reserve (Fed) last Wednesday, which saw no changes in interest rates despite a 0.2% increase in the median core PCE inflation rate for 2024. This was perceived as a dovish move by the Fed, pushing gold to historic highs and breaking through the $2,200 threshold while also putting pressure on the US dollar. Gold prices failed to sustain their historic highs above $2,220 during early US trading last weekend, with declines extending to around $2,157, the low point for the week. With optimistic prospects for the US economy and strong economic data released last Thursday, the US dollar strengthened, leading to significant selling pressure on precious metals. The US dollar index hit a monthly high of 104.49. As the US dollar strengthens, gold priced in USD typically faces liquidity outflows.

On the daily chart, gold is currently positioned around $2,166.60 (23.6% Fibonacci retracement level from $1,984.30 to $2,223.00) and $2,166.80 (9-day moving average), aligning closely with last weekend's closing price of $2,165.50. Additionally, gold is trading above all moving averages, with the 20-day (at $2,131.80) and 100-day (at $2,041.50) moving averages showing strong upward trends. The 14-day Relative Strength Index (RSI) continues to consolidate overbought conditions but remains above the positive zone (62.00), indicating that a recent pullback may continue before a resumption of the uptrend. If the daily closing price surpasses the $2,165.50, $2,166.60, and $2,166.80 levels, the high point of last Friday at $2,186.20 will be tested, potentially breaking above $2,200 (a psychological barrier) once again and challenging the previous high of $2,223. Conversely, if gold sellers regain control and continue to break below last week's support low of $2,146.20, further downward movement towards $2,131.80 (31.8% Fibonacci retracement level and the 20-day moving average) is possible. Below that, the static support at $2,125.00 could act as a lifeline for buyers.

Conclusion for this week: The bullish momentum in the gold market is likely to weaken unless US economic and inflation data disappoint significantly in the coming weeks and continue to push down expectations of US interest rates.

Weekly range: $2,125.00—$2,200.00.

Strategy for this week: Consider buying gold on dips.

XAGUSD

The US dollar surged to a three-week high, adding extra downward pressure on silver.

At the beginning of last week, following the Federal Reserve's decision to maintain current interest rates and as investors digested the Fed's dovish stance, the US dollar index fell, supporting the upward momentum of silver. Silver prices surged by nearly 3% to a four-month high of $25.77. The white metal was just a step away from retesting the 11-month high of $26.14. As expected, the Federal Reserve kept the key borrowing rate unchanged within the range of 5.25%-5.50% for the fifth consecutive time. With the Fed maintaining its expectations of three rate cuts this year, the attractiveness of the US dollar weakened. This led to a substantial increase in market expectations for rate cuts after the Fed's decision on Wednesday. The attractiveness of precious metals strengthened following the Fed's monetary policy announcement last Wednesday. However, towards the end of last week, silver faced some selling pressure for the second consecutive day, touching a one-and-a-half-week low of $24.40. Silver prices continued to decline over the weekend, seemingly continuing the retracement from the four-month high of $25.77. Optimistic prospects for the US economy pushed the US dollar to a three-week high, which in turn was seen as a key factor weakening commodities. Additionally, the generally positive risk sentiment and hopes for a ceasefire in Gaza added extra downward pressure on safe-haven precious metals.

On the daily chart, silver reversed course from the four-month high of $25.77 in the latter part of last week, breaking below $25.00 (a psychological barrier) and $24.87 (23.6% Fibonacci retracement level from $21.93 to $25.77) to the support level around $24.40, the low point for the entire week. It formed a "bearish piercing line" pattern on last Thursday's closing, considered a new trigger for bearish traders. However, the subsequent decline paused around $24.30, the 38.2% Fibonacci retracement level. This should now be a crucial pivot point. Meanwhile, oscillators on the daily chart, while losing attractiveness, remain in positive territory. Therefore, the prudent approach would be to wait for silver to continue falling below the aforementioned support levels around $24.30 and $24.10 (Bollinger Band centerline), then prepare for further devaluation of silver. Subsequently, corrective declines could drag silver below the $24.00 integer mark, testing the 61.8% Fibonacci retracement level at $23.40 and the significant confluence point with the 200-day moving average at $23.34. On the other hand, the breakpoint at $25.30 (lower boundary of the upward channel on the daily chart) may pose a direct barrier before the psychological barrier of $25.00. Sustained strength beyond the latter could trigger a short-covering rebound towards the $25.77 (last week's high) area.

Conclusion for this week: The winds of economic recession are blowing, and the next major gust may push silver to the brink of collapse. Although silver benefits from the conflict in the Middle East, history shows that this white metal cannot escape ominous fundamentals such as rising real yields, a strong US dollar, and panic selling during economic downturns.

Weekly range: $23.40—$25.77.

Strategy for this week: Consider buying silver on dips.

AUDUSD

Last week, for the second consecutive trading week, the Australian dollar depreciated as US data showed mixed results, and the US dollar strengthened. The Australian dollar faced downward pressure. Despite the positive performance of Wall Street, where the three major benchmark indices partially reached historical highs, the Australian stock market suffered losses, particularly in energy and consumer stocks. The US dollar faced renewed strong buying pressure, prompting a reversal in the AUD/USD pair, erasing recent gains and falling to near recent lows around 0.6500. Following the Federal Reserve's decision on Wednesday to keep interest rates unchanged as expected, investors further adjusted their views on the Fed's meeting, and Chairman Powell's dovish stance at the press conference helped the AUD/USD regain momentum. While the US dollar's momentum remains the primary driving factor for the AUD/USD pair for now, it's worth noting that weak copper and iron ore prices are another factor influencing the Australian dollar's trajectory. Additionally, the economic situation in China is expected to have an impact on the Australian dollar. Although stimulus measures that the Chinese government and the People's Bank of China might take could temporarily alleviate economic pressures, sustained improvement in economic indicators is crucial for the strength of the Australian dollar and a significant rise in the AUD/USD pair.

On Friday of last week, the Australian dollar traded slightly above 0.6500. It had previously rebounded to the weekly high of 0.6635 but was capped by resistance levels at 0.6641 (38.2% Fibonacci retracement level from 0.6270 to 0.6871), 0.6643 (upper Bollinger Band), and 0.6667 (March 8th high), forming a "double top" bearish pattern before falling to 0.6500. The immediate support is located around the 61.8% Fibonacci retracement level of 0.6499 and the psychological level of 0.6500. Breaking below this level could lead the AUD/USD pair to test support around 0.6473 (lower Bollinger Band on the daily chart) and 0.6442 (February 13th low). On the upside, direct resistance is at 0.6553 (200-day moving average) and 0.6570 (50.0% Fibonacci retracement level). Breaking above the latter could provide upward support for the AUD/USD exchange rate, exploring the psychological area around 0.6600 and then targeting the weekly high of 0.6635.

Conclusion for this week: Although stimulus measures that the Chinese government and the People's Bank of China might take could temporarily alleviate economic pressures, sustained improvement in economic indicators is crucial for the strength of the Australian dollar and a significant rise in the AUD/USD pair.

Weekly range: 0.6442 - 0.6635.

Strategy for this week: Consider buying the Australian dollar on dips.

USDJPY

The USD/JPY pair slightly retreated from the one-week high of 148.84 touched last Friday. Japan's largest companies fully responded to the EU's wage demands, confirming market expectations of a potential shift in the Bank of Japan's policy stance. This, along with the generally weak risk sentiment, became crucial factors providing some support for the safe-haven yen. Additionally, Bank of Japan Governor Kuroda offered a slightly pessimistic assessment of the economy earlier last week, dashing hopes for a rate hike at the March 18-19 meeting. Furthermore, the US dollar rose for four consecutive trading days last week, aided by expectations that the Federal Reserve will maintain relatively high rates for an extended period to curb inflation, which helped limit the downside potential for the USD/JPY exchange rate. As the Bank of Japan has begun to enter a rate hike cycle, the yen may eventually breathe a sigh of relief, with the Bank of Japan signaling on Tuesday, after announcing that the largest union's wage growth exceeded 5%, that a rate hike could come at the April meeting. With wage growth at its highest level in thirty years and inflation exceeding 2%, Japan's era of negative interest rates is coming to an end. However, it is not expected that the Bank of Japan will embark on a large-scale rate hike cycle.

Last week, the USD/JPY pair tested the 2023 high of 151.86 and formed a bearish pattern, increasing the likelihood of subsequent declines. Ending the week with a bearish pattern further confirmed the bearish hammer pattern formed on Thursday of last week, increasing the likelihood of further downward movement. However, this may only be a short-term reversal pattern, so the decline may be temporary. Indeed, the level of 151.00 represents an area where the Bank of Japan has intervened in the past to appreciate the yen, further increasing the likelihood of the currency pair softening. The expected retracement may drop to around 150.45 (23.6% Fibonacci retracement level from 145.89 to 151.86) and 150.00 (psychological level). On the other hand, 149.58 (middle Bollinger Band) and 149.57 (38.2% Fibonacci retracement level) may immediately provide support. Conversely, a convincing break above last week's high of 151.86 may make the USD/JPY pair stronger, accelerating towards 153.58 (upper Bollinger Band on the weekly chart) and 154.66 (123.6% Fibonacci retracement level from 151.91 to 140.25).

Conclusion for this week: The level of 151.00 represents an area where the Bank of Japan has intervened in the past to appreciate the yen, further increasing the likelihood of the currency pair softening. The expected retracement may drop to around 150.45 and 150.00.

Weekly range: 150.00 - 153.58.

Strategy for this week: Consider selling the US dollar on rallies.

GBPUSD

GBP/USD plummeted last week to just below 1.2600, marking its first daily decline of over 1% since October. As widely expected, the Bank of England kept its bank rate unchanged at 5.25%. The policy statement revealed that eight policymakers voted to hold steady, while one policymaker wanted to cut the policy rate by 25 basis points. The Bank of England did not provide any clues about the timing of a policy shift. Bank of England Governor Andrew Bailey stated last week that they do not need to wait for inflation to fall to 2% before cutting rates. He added that the market can expect more than one rate cut this year and reiterated his growing confidence in inflation moving closer to the target. Meanwhile, US data on Thursday showed that private sector business activity continued to expand at a healthy pace in early March, with the S&P Global Composite PMI coming in at 52.2. No major impactful data is scheduled on the US economic calendar before the weekend. Federal Reserve Chair Powell will deliver opening remarks at the "Fed Listens" event. It's worth noting that the UK's FTSE 100 index rose by about 0.8% on the day, and US stock futures edged higher. If risk-on sentiment begins to dominate the market in the second half, the US dollar may struggle to strengthen further, thereby helping GBP/USD find a foothold.

From a technical perspective, GBP/USD has currently fallen below 1.2600. If the currency pair rebounds to this level and above 1.2623 (38.2% Fibonacci retracement level from 1.2187 to 1.2893), sellers may feel discouraged. In this case, the currency pair may further rise towards 1.2724 (middle Bollinger Band) and 1.2726 (23.6% Fibonacci retracement level), with a breakthrough pointing towards 1.2803 (last Thursday's high). On the downside, as a "bearish engulfing" pattern was observed last Thursday, coupled with the 14-day Relative Strength Index (RSI) currently around 39.00 in the negative zone, significant support is likely to shift towards 1.2540 (50.0% Fibonacci retracement level), followed by 1.2500 (psychological level).

Conclusion for this week: GBP/USD has currently fallen below 1.2600. If the currency pair rebounds to this level and above 1.2623 (38.2% Fibonacci retracement level from 1.2187 to 1.2893), sellers may feel discouraged.

Weekly range: 1.2500 - 1.2726.

Strategy for this week: Consider buying the British pound on dips.

EURUSD

EUR/USD fell over 0.74% to just below 1.0800 last week.

Last week, the euro fell over 0.74% against the US dollar following comments by Joachim Nagel, the Bundesbank President. The currency pair closed just above 1.0800 at the end of the week, potentially signaling the capability of an interest rate cut by the European Central Bank (ECB) before the summer recess. During the European session at the end of last week, Joachim Nagel stated that he expects the ECB to cut interest rates before the summer recess, likely in June, which dealt a significant blow to EUR/USD. Market forecasts anticipate a rate cut of 89 basis points, or possibly three to four 25 basis point rate cuts, with the first one likely in June or July. Nagel emphasized that the initial rate cut does not necessarily imply further action, and the ECB will make decisions on a step-by-step basis as new data becomes available. His recent remarks suggest that he is more concerned about the growth prospects of Europe than his homeland. As early as February, he stated that the Governing Council should wait for second-quarter wage data before deciding on a rate cut.

Recently, EUR/USD has been fluctuating within the range of 1.0800 and 1.0950. It touched near the weekly low of 1.0801 last week and is currently trading slightly below 1.0827 (50.0% Fibonacci retracement level from 1.0516 to 1.1139) and the 200-day moving average of 1.0837, potentially entering a more bearish phase. Such a trend could decline to at least 1.0754 (61.8% Fibonacci retracement level), with a breakthrough further challenging the levels of 1.0700 (psychological level) and 1.0663 (76.4% Fibonacci retracement level). However, the downside momentum seems to lack strength. Although the daily Relative Strength Index (RSI) has fallen into the negative zone (41.90), the lack of momentum does not completely rule out the expectation of further decline in prices. It brings caution and indicates that bears should be careful not to fall into potential false breakouts. Therefore, if EUR/USD suddenly rebounds to the upside and effectively breaks above the 200-day moving average, the currency pair could retest the levels of 1.0878 (middle Bollinger Band), 1.0900 (psychological level), and 1.0901 (38.2% Fibonacci retracement level).

Conclusion for this week: Although the daily Relative Strength Index (RSI) has fallen into the negative zone (41.90), the lack of momentum does not completely rule out the expectation of further decline in prices. It brings caution and indicates that bears should be careful not to fall into potential false breakouts.

Weekly range: 1.0754 - 1.0964

Strategy for this week: Consider buying the euro on dips.

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