Market update: US dollar reclaims throne; EUR/USD, GBP/USD, AUD/USD tank as sentiment sours

The US dollar strengthened against its top peers on Tuesday, supported by higher US treasury yields, as markets tempered bets for a March interest rate cut, with odds of the event falling below 59% from 77% just one day ago.

The move was reinforced after Fed governor Christopher Waller said the FOMC does not need to ease its stance as quickly as in the past, a sign that policymakers intend to proceed with caution.

Against this backdrop, the euro, British pound and Australian dollar fell sharply against the greenback, breaking important thresholds during the pullback.

Fed march meeting probabilities

EUR/USD technical analysis

EUR/USD sank on Tuesday, breaching the lower boundary of a short-term rising channel at 1.0930 and moving towards the 200-day simple moving average positioned just above 1.0840, which represents the next crucial support to monitor. It is imperative for this area to be maintained; failure to do so may result in a retracement towards 1.0770.

On the contrary, if the downward pressure begins to ease and prices rebound in the upcoming trading sessions, technical resistance looms at 1.0930, followed by 1.1020. Should market strength persist, attention could shift towards 1.1075/1.1095, and subsequently, 1.1140.

EUR/USD daily chart

GBP/USD technical analysis

GBP/USD also took a sharp turn to the downside on Tuesday, breaking through channel support and descending towards the 50-day simple moving average located around the 1.2600 level. Cable is likely to establish a base in this region before rebounding, but a breakdown could expose the 200-day simple moving average.

On the flip side, if buyers resurface and spark a bullish reversal, initial resistance lies at 1.2675, followed by 1.2780. Sellers must resolutely protect this technical ceiling; any failure to do so might trigger an upward movement towards the December peak situated above the 1.2800 handle.

GBP/USD daily chart

AUD/USD technical analysis

AUD/USD has slumped in recent weeks, with prices currently sitting above cluster support near 0.6570, where the 200-day SMA aligns with a long-term trendline and the 50% Fib retracement of the Oct-Dec rally. Maintaining this area is crucial; any inability to do so could trigger a descent towards 0.6525, followed by 0.6500. On further weakness, all eyes will be on 0.6460.

On the other hand, if buyers stage a comeback and propel the exchange rate higher, resistance appears at 0.6635 and 0.6685 thereafter. The bulls will have a hard time pushing prices above this barrier, but a successful breakout could pave the way for a rally toward 0.6825.

AUD/USD daily chart

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