EUR/USD falls due to the rise in US yields, markets remain attentive to the FOMC decision

• The Euro falls as investors focus on the upcoming FOMC meeting and interest rate forecasts.
• Eurozone inflation is in line with expectations, but EUR/USD movement is slowed by anticipation of the Fed's policy direction.
• The ECB's Mario Centeno highlights the importance of price stability and suggests that rate adjustments could prevent a recession in the Eurozone.

The Euro falls against the US Dollar at the start of the week, as investors prepare for the monetary policy decision of the Federal Open Market Committee (FOMC). Expectations that “dot plots” will adjust the Federal Reserve's (Fed) monetary policy projections pressure the EUR/USDwhich is trading at 1.0872, down 0.14% on the day.

EUR/USD falls awaiting Fed decision

The current week will witness three important monetary policy decisions by central banks. On Tuesday, the Bank of Japan is expected to raise rates by 10 basis points, ending the era of negative interest rates. The Fed is expected to keep policy unchanged on Wednesday, although speculation is mounting that the US central bank may adjust its interest rate forecasts.

Eurozone (EU) inflation in February, as measured by the Harmonized Index of Consumer Prices (HICP), cooled from 3.3% to 3.1% year-on-year, as expected. The core IPCA fell from 2.8% to 2.6%, in line with forecasts. The data barely moved the EUR/USD pair, as traders prepared for the Fed's decision in two days.

Meanwhile, the head of monetary policy at the European Central Bank (ECB), Mario Centeno, stated that price stability needs financial stability, adding that reducing the main rate can help avoid a recession in the bloc's economy.

Across the pond, the US economic agenda revealed that the National Association of Home Builders (NAHB) market index experienced the largest improvement since July 2023, with a rise of 51 points, compared to 48 in February.

Meanwhile, the fixed income market shows that US bonds remain bid as US Treasury yields push up both the short and long ends of the curve. This is boosting the Dollar, with the US Dollar Index (DXY) rising 0.17% to 103.62.

EUR/USD Price Analysis: Technical Outlook

The daily chart shows that EUR/USD has finally broken below last Friday's low at 1.0872, extending its losses below the 1.0870 figure. However, buyers could be leaning on the 100-day moving average (DMA) at 1.0860, which, once broken, could open the door to further declines. The next key dynamic support levels are the 50-DMA at 1.0850 and the 200-DMA at 1.0838. The first key resistance level would be the 1.0900 mark.