EUR/USD has shifted its auction comfortably above the critical resistance of 1.0800 in the early European session. The major currency pair is expected to extend its upside journey towards the round-level resistance of 1.1100.
The EUR/USD pair weakened after approaching the 1.1100 area but still held onto its daily gains. On the 4-hour chart, the pair remains above the 20-period Simple Moving Average (SMA) at 1.1000, and the Relative Strength Index (RSI) is moving north, approaching 70. However, Momentum is pulling back. Overall, the bias favors the bulls, and a test of 1.1100 seems likely, with immediate resistance at 1.1120, followed by 1.1160.
However, the risk is that the Euro has once again failed at 1.1100 and failed to hold above 1.1050, staying in a range. Ahead of the Asian session, a slide below 1.1035 would expose 1.1000, and then a more important support at 1.0970. On a wider perspective, the critical area remains at 1.0900/10.
Fundamental Overview
The EUR/USD pair peaked at 1.1091 after the Federal Reserve decision and then pulled back toward 1.1050, poised for the highest daily close since 2022. The bias is to the upside, supported by expectations that the European Central Bank (ECB) will raise rates again and sound hawkish.
The US Dollar tumbled but then recovered after the Fed’s decision to raise interest rates by 25 basis points to 5.00-5.25%, the highest since 2007. In the statement and later during Chair Powell’s remarks, the central bank signaled a potential pause. US yields fell modestly, and equity prices retreated. There was limited impact, as the Fed delivered as expected.
On Wednesday, data showed that Euro area’s Unemployment Rate unexpectedly dropped from 6.6% to 6.5%. On Thursday, several data releases are due, including the final readings of the HCOB Services and Composite PMI, as well as the Euro area’s March Producer Price Index (PPI). However, these releases will likely be overshadowed by the upcoming European Central Bank (ECB) meeting, where a 25 basis points interest rate hike is expected, although a 50 bps hike is also possible. The ECB’s decision will be crucial for the Euro.
After the ECB meeting, all eyes will turn to the US Non-Farm Payrolls (NFP) on Friday. The ADP Employment report (sometimes a preview of NFP) surpassed expectations with an increase in private payrolls of 296,000 in April, significantly above the market consensus of 148,000. On Thursday, Q1 Unit Labor Costs and the weekly Jobless Claims are due.
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