The rate of EUR to USD has been declining, as sellers remained in control of EUR/USD during most of March, but they are facing the 50 daily SMA now, which is acting as support. However, the fundamentals are aligning for further downside momentum, which points to a break of the 50 daily SMA next week.

EUR/USD Chart Weekly – The 50 SMA Is Still Holding

EUR/USD turned bearish at the start of the decade and has been making lower highs since then, however, since October 2022 the lows have been getting higher as well, after this forex pair fell below parity earlier that year. However the 50 SMA (yellow) is partly to blame for this, since it has been providing support since November last year, stopping this pair from declining further.

But, we might see a break soon, which would open the door for 1.05 where the 100 SMA (green) stands, as the ECB is expected to employ a rate cut policy lowering interest rates to 2.25% possibly by the end of 2024.  Analysts expect the FED and the ECB to start cutting interest ratsin June. Goldman Sachs foresees both the Federal Reserve and the European Central Bank embarking on a path of monetary easing, with the Fed initiating a series of rate cuts starting in June 2024 and the ECB gradually reducing its policy rate over the same period.

The current federal funds rate range of 5.25-5.5% is anticipated to remain unchanged until June. Then, internet rates are forecasted to be cut by 25 basis points during the June, September, and December meetings. Subsequently, four additional cuts are expected next year, followed by one last cut in 2026, sending rates to around 3.50%. Regarding the Balance Sheet Adjustment, the Treasury runoff cap is projected to be reduced in half from $60 billion to $30 billion per month after the May FOMC meeting.

Regarding the European Central Bank, they see a steady stance. The policy rate is expected to be maintained at 4.00% until June, to be followed by series of 25 basis point reductions at every meeting, gradually decreasing the policy rate to 2.25%. This reduction is expected to consist of five cuts in 2024 and two more in 2025.

EUR/USD Live Chart