EUR/USD turns lower for the third straight day and seems vulnerable to slide further.
Expectations that the ECB will start cutting rates in April continue to undermine the Euro.
Hopes of higher for longer Fed rates favour the USD bulls and validate the negative bias.
The EUR/USD pair attracts fresh sellers following an intraday uptick to the 1.0765 region and drops back closer to a two-month low during the European session on Tuesday. The initial market reaction to an unexpected jump in Germany’s Factory Orders fades rather quickly in the wake of expectations that the European Central Bank (ECB) could start cutting interest rates by April amid falling inflation in the Eurozone. This acts as a headwind for the shared currency, which, along with the underlying bullish tone around the US Dollar (USD), contributes to capping the upside for the currency pair.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, holds firm near its highest level since November 14 as markets seem to have fully priced out early rate cuts by the Federal Reserve (Fed). Recent US macro data suggested that the economy remains in good shape, giving the Fed the headroom to keep rates higher for longer. Apart from this, geopolitical tensions and worries about slowing economic growth in China – the world's second-largest economy – should benefit the safe-haven buck, suggesting that the path of least resistance for the EUR/USD pair is to the downside
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