Euro Update: EUR/USD Remains Supported Ahead of Fed Chair Powell’s Testimony

• Chair Powell testifies before the Senate this afternoon.
• The Euro is flat to marginally better bid over the past week.

The European Central Bank (ECB) is becoming increasingly worried about the current level of inflation in the single block and its message of higher rates for longer is giving the Euro an underlying bid. There’s talk now of an additional 200 basis points of interest rates hikes by the ECB over the coming months to combat persistently high price pressures in the Eurozone, taking the central bank’s rate to 4.5%. In July last year, the ECB’s deposit facility was at 0%.

The main risk event of the week, Jerome Powell’s semi-annual testimony to the Senate Banking Committee begins at 15:00 GMT today. Chair Powell will be questioned by US lawmakers on the central bank’s course of action to reduce inflation and his answers will provide the market with further insight into where the Fed sees interest rates ending up. This terminal rate has been pushed higher over the course of this year from a market level of 4.8% to a fraction under 5.5%.

In addition to Powell’s commentary, this week sees the latest US Jobs Report released on Friday. The path of the US dollar in the weeks ahead should be much clearer going into the weekend.

EUR/USD DAILY PRICE CHART – MARCH 7, 2023

EUR/USD has been moving slowly higher over the last eight trading sessions, creating a mini-series of higher highs and higher lows. This price action however has formed a bearish flag formation that suggests a break lower is on the cards. Initial support is seen around the recent double low near the 1.0530 level, before 1.0500 and 1.0483 come into play.

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EUR/USDBULLISH

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CHANGE IN	LONGS	SHORTS	OI
DAILY	-4%	2%	-1%
WEEKLY	-11%	8%	-2%