EUR/USD is easing toward 1.1000 in the European session, having failed to sustain above 1.1050. The pair is heading south, as the US Dollar finds its feet amid a cautious market mood. Investors weigh ECB-speak, US consumer data and tech earnings ahead.
EUR/USD turned south after the Relative Strength Index (RSI) indicator on the four-hour chart rose above 70, suggesting that the pair’s latest pullback is a technical correction.
On the downside, 1.1000 (psychological level, static level, 20-period Simple Moving Average (SMA) and 50-period SMA) aligns as important support. A four-hour close below that level could attract technical sellers and trigger an extended decline toward 1.0950 (100-period SMA, Fibonacci 23.6% retracement) and 1.0900 (psychological level, static level).
1.1050 (static level) acts as interim resistance before 1.1075 (end-point of the latest uptrend) and 1.1100 (psychological level).
EUR/USD has staged a technical correction and declined below 1.1050 in the European morning after having touched a fresh 10-day high near 1.1070 earlier in the day. 1.1000 aligns as key support for the pair in the short term and sellers are likely to remain on the sidelines unless this level is broken.
The sharp decline witnessed in the US Treasury bond yields weighed on the US Dollar on Monday and provided a boost to EUR/USD. With the benchmark 10-year US Treasury bond yield losing more than 2% and falling below 3.5%, the US Dollar Index fell nearly 0.5% on the first trading day of the week.
Investors seem to be reacting to renewed concerns over the financing conditions after First Republic Bank’s earnings report revealed that the bank’s deposits plunged by more than $1000 billion in the first quarter.
Meanwhile, European Central Bank (ECB) Chief Economist Philip Lane said early Tuesday that it was still not the right time to stop raising rates but noted that further rate hike after next week’s policy meeting will depend on data.
Later in the session, the Conference Board’s consumer survey will be featured in the US economic docket. Rather than the headline Consumer Confidence Index, investors will pay close attention to the one-year inflation expectation component, which edged higher to 6.3% in March from 6.2% in February. A decline in that component could weigh on the USD and vice versa but the market reaction could remain short-lived ahead of this week’s key data releases from the US.
It’s also worth noting that Google and Microsoft will be releasing first-quarter earnings reports after the closing bell on Tuesday. Hence, market participants could stay away from risk-sensitive assets in the second half of the day and help the USD limit its losses.