EUR/USD lost its traction in the European morning and extended the decline below the 1.1000 area after Germany’s Q1 GDP data missed estimates with 0% QoQ. Renewed US Dollar strength is also adding to the weight on the pair. EU GDP, German and US inflation data are
From a technical perspective, any subsequent fall is more likely to find decent support near the lower end of over a one-month-old upward sloping trend-channel, currently pegged just below the 1.1000 psychological mark. This coincides with the 100-period Simple Moving Average (SMA) on the 4-hour chart and should act as a pivotal point, which if broken decisively should set the stage for some meaningful corrective pullback from a 13-month high touched on Wednesday. The EUR/USD pair might then accelerate the fall towards the 1.0900 mark before eventually dropping to the 200-period SMA on the 4-hour chart, currently around the 1.0880 area. Some follow-through selling will negate any positive bias and shift the near-term bias in favour of bearish traders, paving the way for deeper losses.
On the flip side, the 1.1040 horizontal zone now seems to act as an immediate hurdle, above which bulls might aim to conquer the 1.1100 mark. Some follow-through buying should allow the EUR/USD pair to accelerate the momentum towards challenging the ascending channel resistance, currently around the 1.1160 region. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent upward trajectory witnessed since mid-March.
The risk-on impulse caps gains for the safe-haven Greenback and lends support to the EUR/USD pair.
The shared currency is further underpinned by expectations for additional interest rate hikes by the European Central Bank (ECB) in the coming months. In fact, the ECB’s Philip Lane told in a recent interview on Tuesday that leaving interest rates at the current level would be inappropriate despite falling inflation. This, in turn, suggests that the immediate market reaction to Friday’s release of the prelim German consumer inflation figures is more likely to be muted, albeit a stronger CPI print could provide a modest lift to the EUR/USD pair.
The focus will then shift to the release of the US Core PCE Price Index – the Fed’s preferred inflation gauge – later during the early North American session. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the EUR/USD pair on the last day of the week. The aforementioned fundamental backdrop, meanwhile, seems tilted in favour of bulls and suggests that the path of least resistance for spot prices is to the upside.
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