• EUR/USD faces downward pressure as investors adopt a cautious stance ahead of crucial data.
• The subdued US Treasury yields could weaken the US Dollar.
• Traders await the Eurozone Economic Sentiment Indicator for February on Wednesday.

A cautious stance is adopted by traders ahead of the release of the preliminary Gross Domestic Product Annualised (Q4) from the United States and the Euro Zone Economic Sentiment Indicator for February later in the day, which causes EUR/USD to extend losses to almost 1.0840 during the Asian session on Wednesday.

Although the US Dollar Index (DXY) is making an effort to maintain its gains amid a risk-off environment, the US Dollar (USD) may have been under pressure to decline due to the tame US Treasury yields. By press time, the 2-year and 10-year yields on US Treasury bonds were 4.68% and 4.29%, respectively, and the DXY had improved to about 103.90.

The US Housing Price Index (MoM) rose by 0.1%, less than the 0.4% increase in November and the 0.3% increase in December that was anticipated. Furthermore, US Durable Goods Orders fell 6.1%, which was less than the 0.3% decline that had previously occurred and the 4.5% decrease that the market had anticipated. The CME FedWatch Tool indicates that the chance of rate reduction in May and June is 21% and 49.8%, respectively, while the chance of cuts in March has dropped to 1.0%.

Nonetheless, the recent remarks made by Christine Lagarde, the president of the European Central Bank (ECB), on Monday may benefit the Euro (EUR). Even though inflation is gradually getting closer to the central bank’s targets, Lagarde stated that the ECB is determined to stick with its existing policy measures for the foreseeable future.

With a print of -29, the Gfk German Consumer Confidence Survey for March came in line with expectations after reading -29.6 in February. For more insights into the state of the economy later in the week, attention will be drawn to Germany’s Retail Sales and Consumer Price Index (CPI) inflation figures.

Commerzbank economists stress the significance of Friday’s inflation data, but they don’t see any clear pattern suggesting the Euro is losing ground. However, Kit Juckes, Chief Global FX Strategist at Société Générale, emphasizes that the direction of the EUR/USD pair this year will be determined by whether the European Central Bank or the Federal Reserve cuts rates first or most aggressively.

Conclusion

EUR/USD depreciation in the forex market is a multifaceted phenomenon influenced by a variety of economic, political, and psychological factors. By understanding the roots of this depreciation and adopting intelligent trading strategies, you can transform market challenges into opportunities for profit.

Remember, successful trading is not about predicting every movement in the market. It is about rigorously analyzing the factors at play, managing risk, and making informed decisions. With a strategic approach and an attentive eye on the market, you can position yourself as a savvy trader capable of not only surviving in a risk-off environment but thriving despite it.

As we close this guide, be prepared to educate yourself on the dynamics of the forex market continuously. Stay attuned to the latest news, hone your analytical skills, and remain adaptable in your strategies. The EUR/USD pair may continue to weaken, but with the right tools and mindset, you can confidently face the market’s challenges and chart a course for profitable trading.