EUR/USD Rate Talking Points
EUR/USD[1] trades to a fresh monthly low (1.1704) as it snaps the range bound price action carried over from late last week, but the Relative Strength Index (RSI) appears to be diverging with price as the weakness in the exchange rate fails to push the indicator into oversold territory.
EUR/USD Rate Outlook Clouded by RSI Divergence
Recent price action indicates a further decline in EUR[2]/USD[3] as it extends the series of lower highs and lows from the start of the week, but fresh updates coming out of the European Central Bank (ECB) appear to be shoring up the Euro as the central bank scales back the pace of the pandemic emergency purchase programme (PEPP) for the first time since the consolidated financial statement for February 26.
Source: ECB
EUR/USD attempts to retrace the decline from earlier this week as the PEPP widens EUR 20.4 billion in the week ending March 26 after expanding EUR 21.9 billion the week prior, and it remains to be seen if the pace of asset purchases have reached its peak as the update to the Euro Area Consumer Price Index (CPI) shows the headline reading widened to 1.3% from 0.9% in February.
However, the ECB may continue to endorse a dovish forward guidance as the Economic Bulletin[4] for March underscores an adjustment in the weighing for the Harmonised Index of Consumer Prices (HICP), and the Governing Council may retain the current course for monetary policy at its next interest rate decision on April 22 as President Christine Lagarde[5]warns of a technical recession.
Until then, the Euro stands at risk of facing headwinds if the ECB ramps up the pace of the PEPP, and the decline from
