- The EUR/USD pair's strongest upward trajectory stalled at the 1.0955 resistance level, the pair's highest level in five months.
- It then retreated to the 1.0860 support level following investor reaction to the announcement of Eurozone inflation figures and the US Federal Reserve's policy announcement. It stabilized around 1.0910 at the start of trading on Thursday.
- Forex investors are cautiously monitoring the future of the Trump administration's retaliatory trade wars and their impact on future global economic growth.
- This is in addition to the reaction to the announcement of German fiscal and economic stimulus plans, which strongly supported the euro's recent gains.
US Federal Reserve Keeps Interest Rates Unchanged
According to the results of the economic calendar data, the US Federal Reserve kept the federal funds rate unchanged at 4.25%-4.5% during its March 2025 meeting, extending its pause period on US interest rate cuts, which began in January, in line with expectations. Policymakers indicated increasing uncertainty about the economic outlook. However, it still expects interest rate cuts of about 50 basis points this year, the same level as December's expectations.
Meanwhile, US GDP growth forecasts for this year were raised to 1.7% from 2.1% in December. Growth forecasts for 2026 (1.8% versus 2%) and 2027 (1.8% versus 1.9%) were also raised. In contrast, the personal consumption expenditures (PCE) inflation rate is expected to rise in 2025 (2.7% vs. 2.5%) and 2026 (2.2% vs. 2.1%), but the forecast remains at 2% for 2027. The unemployment rate is expected to rise slightly this year to 4.4% (vs. 4.3%), but the forecast remains unchanged at 4.3% for both 2026 and 2027.
In April, the Federal Reserve will slow the decline in its securities holdings by reducing the cap on Treasury redemptions from $25 billion to $5 billion.
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Trading Tips:
Keep in mind that EUR/USD gains depend on testing the 1.10 psychological peak, which is the most important to crown bulls' control over the trend and prepare for new upward breakouts.
The Future of US Interest Rate Cuts
Although the US Federal Reserve maintained its expectations for two rate cuts, economists have indicated subtle indications that the US central bank is likely to keep US interest rates unchanged for some time. This is likely to keep borrowing costs on mortgages, auto loans, and credit cards unchanged in the coming months. Eight of the nineteen Fed officials have confirmed that they expect only one rate cut or zero interest rates this year, up from just four in December.
For his part, US Federal Reserve Chairman Jerome Powell stated in his press conference that President Donald Trump's tariffs have started to slightly raise inflation and are likely to hinder the progress the central bank has made in reducing inflation in recent years. Powell added, "I think we're getting closer and closer" to price stability. "I'm not saying we've reached it. ... I think that with the arrival of tariff inflation, further progress may be delayed."
However, he added that the Fed still expects inflation to return to close to 2% by the end of next year. This statement suggests that Powell is more inclined to view the inflationary effects of tariffs as a one-time change, rather than a sustained rise in prices.
EUR/USD Technical Analysis Today:
According to trading on the daily chart, the EUR/USD price is still moving within an ascending channel. As I mentioned before, the 1.10 psychological resistance will remain the most important to confirm the strength of the bulls' control over the trend. At the same time, technical indicators will move towards strong overbought levels, led by the RSI and MACD. As we mentioned before, closely monitor the recent euro strength factors to anticipate the imminent time for profit-taking, especially if investors' risk aversion returns.
Conversely, over the same timeframe, the 1.0770 support level remains the most important for bears to break the current uptrend. Today, the EUR/USD will be affected by the announcement of the weekly US jobless claims and the Philadelphia Fed manufacturing index, along with any new developments regarding US tariffs.
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