EUR/USD remains pressured below 1.0100, consolidating Friday’s retreat from a one-year high early Monday. The US Dollar sticks to its recovery mode at the start of the week despite a better market mood and sluggish US Treasury bond yields. ECBspeak eyed.
From a technical perspective, any meaningful slide below the Asian session low, around the 1.0960-1.0950 area, is likely to find decent support near the 1.0920-1.0915 region. This is closely followed by the 1.0900 mark, below which the corrective slide could drag the EUR/USD pair towards the 1.0850 intermediate support. Spot prices could eventually slide further below the 1.800 round figure and challenge the 50-day Simple Moving Average (SMA), currently around the 1.0745 zone.
On the flip side, momentum back above the 1.1000 psychological mark now seems to face some resistance near the 1.1040 area and the YTD peak, around the 1.1075 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and push the EUR/USD pair beyond the 1.1100 mark, towards testing the next relevant hurdle near the 1.1160-1.1170 horizontal zone.
The markets are pricing in a greater chance of another 25 bps lift-off at the next FOMC meeting in May and the bets were lifted by a rise in short-term inflation expectations. The University of Michigan’s preliminary report showed that Consumer Sentiment Index inched up from 62.0 to 63.5 in April and one-year inflation expectations rose to 4.6% from 3.6% in March. This, in turn, remains supportive of elevated US Treasury bond yields and continues to underpin the Greenback.
Apart from this, impressive bank earnings further eased concerns about a banking crisis that unfolded in March. This, along with resilience in US core retail sales, suggested that the US economy is not so bad. Moreover, the gains in January and February put consumer spending firmly on track to accelerate in the first quarter. That said, weaker headline sales set consumer spending on a lower growth path heading into the second quarter and reaffirmed that the Fed’s year-long interest rate hiking campaign is cooling domestic demand. Adding to this, the anticipated pause in the Fed’s policy tightening cycle in June might hold back the USD bulls from placing aggressive bets. This makes it prudent to wait for strong follow-through selling before confirming that the EUR/USD pair has formed a near-term top and positioning for deeper losses.
There isn’t any relevant market-moving macro data due from the Eurozone on Monday, while the US economic docket features the release of the Empire State Manufacturing Index later during the early North American session. Apart from this, the US bond yields, might influence the USD price dynamics and provide some impetus to the EUR/USD pair. Traders will further take cues from a scheduled speech by the European Central Bank (ECB) President Christine Lagarde, which will drive the shared currency and contribute to producing short-term opportunities around the major.