21.03.202311:45 Forex Analysis & Reviews: Analysis of EUR/USD on March 21. ECB to stick to monetary tightening

Hi everyone! The EUR/USD pair kept moving to 1.0750 yesterday. I think this level is rather important because the price has already reached this level three times and retreated from it. Thus, this time, the same situation may happen. In this case, the pair could decline to 1.0609, the Fibonacci correction level of 161.8%. However, if it consolidates above 1.0750, it is likely to rise to 1.0861, the next Fibo level of 200.0%.

Yesterday, Christine Lagarde made two speeches. She stated that inflation is too elevated. It is projected to remain high for a long time. For this reason, the ECB should stick to aggressive tightening. Inflation is declining albeit at a slower pace. The regulator needs to make sure that consumer prices are dropping steadily. Currently, there is a risk of a new surge.

Earlier, ECB Economy Commissioner Paolo Gentiloni said that the EU economy will be able to avoid a severe recession. Judging by the statements of ECB officials, the regulator will continue to raise the key rate. It may undertake new rate hikes after a 25 basis point rate increase in May. I assume that there will be 3 more rate increases in 2023. However, the regulator could slow monetary tightening amid the banking crisis in Europe and the United States.

Today, Christine Lagarde will deliver another speech. She has already pointed out that the ECB will not abandon a hawkish stance. She also touched upon the topic of inflation. This is why she will hardly say anything new. The next meeting will not take place soon.

On the 4-hour chart, the pair continues to move in the sideways corridor. If the pair retreats from its upper border, it may decrease to the lower border. If it consolidates above the uptrend corridor, it may climb to 1.0941, the Fibo level of 50.0%.

Commitments of Traders (COT):

In the last reporting week, speculators closed 6,886 long positions and opened 6,865 short ones. The sentiment of large traders remains bullish. However, please note that the last available report is from March 7. It was revealed several weeks ago. The total number of long positions now amounts to 234,000 and short ones – 85,000. The euro has been falling for several weeks but at the same time, there are no fresh COT reports. In the last few months, there have been lots of positive factors for the euro. Hence, it has been growing for some time. The situation remains favorable for the euro after a protracted downward movement. The outlook is bullish at least until the ECB raises the interest rate by 50 basis points.

Economic calendar for US and EU:

EU– Christine Lagarde will deliver a speech (12:30 UTC).

Christine Lagarde will make a speech on March 21. However, the reaction will depend on what exactly the ECB president will say. The impact of fundamental factors on market sentiment may be low.

Outlook for EUR/USD and trading recommendations:

Traders are recommended to open long positions if the pair declines from the 1.0750 level on the hourly chart with target levels of 1.0609 and 1.0523. You could also sell the pair after a fall from the upper border of the sideways channel on the 4-hour chart. I advised traders to go long if the pair consolidated above 1.0609 with the target level of 1.0750 on the hourly chart. Now, you may keep these positions open. You could buy the pair after a jump above 1.0750 with the target level of 1.0861.