EUR/USD consolidates below 1.1100 amid persistent USD weakness

EUR/USD is consolidating gains below 1.1100 amid a risk-on mood in the European session. The US Dollar remains vulnerable amid expectations that the Fed is on track to end its tightening cycle, following soft US inflation data. US Retail Sales data is awaited.

EUR/USD climbed out of the ascending regression channel and the Relative Strength Index (RSI) indicator on the four-hour chart rose toward 80, pointing to overbought conditions.

In case the pair stages a correction and returned within the ascending channel, 1.1020 (mid-point of the channel), 1.1000 (psychological level, static level) and 1.0970 (20-period Simple Moving Average (SMA)) align as support levels.

On the upside, 1.1100 (psychological level) aligns as the next bullish target ahead of 1.1150 (static level from March 2022).

Fundamental Overview

GMT
Event
Vol.
Actual
Consensus
Previous
Thursday, Apr 13
24h
Friday, Apr 14
07:00
3.1%
3.1%
3.1%
07:00
1.1%
1.1%
1.1%
12:30
-0.3%
-0.1%
12:30
0.6%
0.5%
12:30
-0.4%
-0.4%
12:30
-0.1%
-0.1%
12:30
-0.1%
0.2%
12:30
-3.7%
-1.1%
12:30
-2.7%
4.1%

EUR/USD has gathered further bullish momentum and climbed to its highest level in over a year above 1.1070. The pair’s near-term technical outlook shows overbought conditions as investors move to the sidelines ahead of the last data releases of the week from the US.

On Thursday, the US Bureau of Labor Statistics reported that the Producer Price Index (PPI) declined to 2.7% in March from 4.9% in February. On a monthly basis, the PPI and the Core PPI came in at -0.5% and -0.1%, respectively. Moreover, the US Department of Labor’s weekly data showed that the Initial Jobless Claims rose to 239K from 228K. In turn, the US Dollar (USD), which had suffered large losses on soft Consumer Price Index (CPI) data on Wednesday, continued to weaken against its rivals.

Meanwhile, European Central Bank (ECB) Governing Council members Bostjan and Vasle Pierre Wunsch said on Thursday that they could either opt for a 25 basis points or a 50 basis points rate hike at the May meeting. These comments provided an additional boost to the Euro.

Early Friday, EUR/USD stays relatively quiet as investors await the US data releases. Retail Sales are expected to decline by 0.4% on a monthly basis in March. Earlier in the week, NY Fed President John Williams said they will look at the sales data to see the impact of restrictive policy on the activity. In case there is a bigger-than-expected decline in Retail Sales, the USD could have a hard time finding demand ahead of the weekend and vice versa.

March Industrial Production and the University of Michigan’s preliminary Consumer Sentiment Survey for April will also be featured in the US economic docket.

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