EUR/USD drops below 1.1000 after ECB’s BLS, eyes on EU inflation

EUR/USD came under renewed bearish pressure and broke below 1.1000 on Tuesday after the ECB’s Bank Lending Survey unveiled the negative impact of high interest rates on financing conditions. Eyes on Eurozone inflation data.

The EUR/USD pair trades at the base of its latest range, and the daily chart shows it is pressuring a mildly bullish 20 Simple Moving Average (SMA) that advances above the longer ones, limiting chances of a steeper decline. Technical indicators, in the meantime, accelerated their declines within positive levels and are currently approaching their midlines. Bulls may step back if the pair slides through 1.0950, at least temporarily, and particularly ahead of the upcoming first-tier events. Still, the long-term view favors an upward extension, at least as long as the pair holds above 1.0745, the 61.8% retracement of the 2022 yearly decline.

For the near term, and according to the 4-hour chart, the chances of a bearish continuation have increased, given that the pair trades below its 100 SMA while the 20 SMA gains downward traction above it. However, technical indicators have turned higher within negative levels, suggesting selling interest is not strong enough at the moment. To regain its upward momentum, EUR/USD needs now to overcome a strong static resistance level at 1.1045.

The EUR/USD pair seesawed between gains and losses on Monday, ending the day in the red near an intraday low of 1.0963. The Greenback started the day with a firm footing, changing course during European trading hours but finally resuming its advance around Wall Street’s opening.

The American currency advanced alongside government bond yields and despite the better tone of stock markets. Wall Street edged higher, adding to Friday’s gains following news that JP Morgan bought most First Republic Bank assets, rescuing the troubled institution with blessings from the US regulator, the  Federal Deposit Insurance Corporation (FDIC).

The US Dollar found additional support on macroeconomic figures, as the United States (US) April ISM Manufacturing PMI improved by more than anticipated, up to 47.1 from 46.3. Also, March Construction Spending rose by 0.3% MoM, better than the 0.1% decline expected by market players. Not so encouraging, the final estimate of the S&P Global Manufacturing PMI for the same month was downwardly revised from 50.4 to 50.2.

On Tuesday, Germany will publish March Retail Sales, foreseen up by 0.4% MoM. S&P Global will release the final Manufacturing PMIs for the Eurozone. The latter will unveil the preliminary estimate of the April Harmonized Index of Consumer Prices (HICP), expected to have risen at an annualized pace of 6.9%.

The data-packed week will continue with the Federal Reserve (Fed) and the European Central Bank (ECB) monetary policy decisions on Wednesday and Thursday, to end Friday with the US Nonfarm Payrolls (NFP) report.

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