EUR/USD readies a breakout after strong EU confidence data

The EUR/USD price is consolidating as traders react to the new coronavirus wave in Europe and the ongoing challenges in vaccinations. It is trading at 1.1932 ahead of the European CPI and US retail sales numbers and the FOMC decision.

EUR/USD price action

Euro struggles to find direction

The euro is in a tight range against the dollar and other currencies as the market watches the ongoing new wave in Europe. According to The Guardian, countries like Germany, Italy, France, and Poland have started seeing a spike in new cases. Some of these countries are now set to impose some restrictions to curb the spread.

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The ongoing vaccination drive hit a roadblock this week as more European countries suspended the use of AstraZeneca’s vaccine. Instead, these countries are now relying on vaccines from Moderna and Pfizer.

Still, there are some positive news from Europe. For example, data by the ZEW Institute said that the economic sentiment for March rose from 71.2 to 76.6. This was better than the median estimate of 74.0. In the same period, the index for current conditions improved to -67.2 to -61.0. 

Throughout Europe, the sentiment improved from 69.6 to 74.0. This performance was because of optimism that the region’s economy will improve because of the vaccine. 

Looking ahead, the EUR/USD is struggling to find direction ahead of the Fed interest rate decision. Like the European Central Bank (ECB), analysts expect the bank to leave its policies unchanged until conditions increased. Still, forex traders will be focusing on any changes in the accompanying statement.

The EUR/USD will also react mildly to the important EU inflation numbers set for tomorrow. Based on the preliminary numbers, economists expect the data to show that the headline CPI rose by 0.9% in February because of the higher oil prices. The core CPI is expected to rise to 1.1%.

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EUR/USD technical analysis

EUR/USD chart

The three-hour chart shows that the EUR/USD price dropped by more than 3% between February 25 and March 9. The price then rebounded by 1.30% and reached a high of 1.1989 on March 11. Since then, the price has struggled to find direction as traders assess the performance of the bond market. It has also formed a symmetrical triangle pattern. Therefore, this is a sign that the price will have a bullish or bearish breakout in the near term.

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