CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD rises due to US GDP shortfall and elevated inflation data.
• Technical resistance near 50 and 200-day MAs at 1.0805/07; 100-DMA at 1.0848 next hurdle.
• Downside below 1.0694 could retest year's low at 1.0601, possibly extending to 1.0516.

On Thursday, the Euro rose against the US Dollar after US economic data portrayed the economy as weaker than expected. At the same time, the inflation figure prompted investors to price out the Federal Reserve's rate cuts in 2024. At the time of writing, the EUR/USD trades at 1.0729, up by 0.29%.

EUR/USD Price Analysis: Technical outlook

From a technical standpoint, the EUR/USD remains bearishly biased, but in the short term, it could test the confluence of the 50 and 200-day moving averages (DMAs) at 1.0805/07. If buyers clear that stir resistance, buyers must crack the 100-DMA at 1.0848. Subsequent gains are seen above that level, with the 1.0900 mark up next.

On the flip side, if EUR/USD sellers drag the spot price below the February 14 low of 1.0694, that would pave the way toward the year-to-date (YTD) low of 1.0601, followed by the November 1, 2023, intermediate support at 1.0516.

EUR/USD Price Action – Daily Chart

• EUR/USD extends its recovery as mixed US data weighs on the US Dollar. 
• The US Dollar may also now already have “a lot priced in” according to analysts at Commerzbank. 
• The short-term trend could now be bullish on the 4-hour chart. 

EUR/USD sherpa-treks higher on Thursday, with a foothold now above 1.0700 as it continues its labored recovery from the 1.0601 April lows. Recent mixed US data has tarnished the image of the US economy, undermining the supremacy of the US Dollar (USD), whilst the Euro (EUR) holds firm on strong services-sector data. 

EUR/USD rises as US data mixed

EUR/USD began its recovery on Tuesday after preliminary US PMI data for April showed an unexpected cooling in business activity, suggesting the economy was beginning to feel the burden of higher interest rates. 

On Wednesday, the US Census Bureau revealed that Durable Goods Orders in the United States increased 2.6% MoM in March, up from a 0.7% rise previously, and beating estimates of 2.5%. Core goods, which exclude transportation, increased by 0.2% MoM, an improvement over February's 0.1% increase, but short of the 0.3% projected.

Whilst the Durable Goods data was positive, it failed to move USD. This could be because it is viewed as a volatile series or, as some now think, because a lot is already priced into the Dollar, making it less sensitive to positive data. 

“A lot is already priced into the Dollar” – Commerzbank 

EUR/USD’s recovery may be due to the US Dollar having priced in a lot, in particular the acute shift in market expectations regarding the future course of interest rates, according to Analysts at Commerzbank. 

Since the Federal Reserve’s (Fed) March meeting markets have consistently pushed back the date by when the Fed is likely to begin cutting interest rates – higher interest rates attract more foreign capital inflows and are thus positive for the US Dollar. 

This recalibration of the future path of interest rates has now been fully priced in, according to Antje Praefcke, FX Analyst at Commerzbank, and in the absence of more catalysts, makes USD more vulnerable to “bad news” than “good news”. 

“In my opinion, the market's reaction (USD falling this week) shows that a lot is already priced into the Dollar, such as a soft landing of the economy or a Fed that will only cut the key interest rate much later than previously thought,” says Praefcke. 

The US Dollar having “priced in a lot” is why it reacted more to the poor US PMI data on Tuesday than the positive US Durable Goods Order data on Wednesday. 

“It is becoming increasingly difficult for the Dollar to benefit from facts and figures that underpin this expectation (a delay in future rate cuts); on the contrary, it tends to react sensitively when the market has doubts about its current expectation in the face of not-so-good data. The Dollar is gradually running out of steam, although it is currently the undisputed most popular currency and is likely to remain so,” adds the Analyst. 

EUR/USD rises due to services-sector effect

The Euro (EUR), meanwhile, stabilizes as strong Services PMI data stokes services-sector inflation expectations. This is seen potentially reigning in the European Central Bank (ECB) as it forges ahead with cutting interest rates. 

Although a June rate cut is probably still a “fait accomplis”, according to Luis de Guindos, the Vice President of the ECB, his colleague at the ECB, Bundesbank President Joachim Nagel was more cautious on Wednesday. 

Nagel said, “Services inflation remains high, driven by continued strong wage growth,” and until inflation fell in a sustainable manner he could not “pre-commit to a particular rate path.”

Technical Analysis: EUR/USD breaks out of short-term range

EUR/USD has broken out of the rectangular range it was trading in on the 4-hour chart by piercing above the ceiling at 1.0700. 

It is now less certain EUR/USD is forming a Bear Flag price pattern, which has become deformed by the breakout. 

EUR/USD 4-hour Chart

There is an argument for the short-term trend now being bullish and therefore suggestive of more gains in the pair. Resistance from a previous lower high on April 11 gives an initial target at 1.0757. Then the 50-day and 200-day Simple Moving Averages (SMA) on the daily chart (not shown) are likely to resist at 1.0807.

On the other hand a break below the 1.0601 April 16 low would revive the Bear Flag hypothesis. 

According to technical lore, the expected move down from a Bear Flag equals the length of the preceding “pole” or a Fibonacci ratio of the pole. 

The Fibonacci 0.618 ratio of the pole extrapolated lower gives a conservative target at 1.0503. The next concrete target is at 1.0448 – the October 2023 low. A fall of equal length to the pole would take EUR/USD to 1.0403.

• EUR/USD could approach the 21-day EMA at 1.0727.
• A break below 1.0700 could lead the pair toward the major support of 1.0650 and April’s low at 1.0601.
• A breach above the major level of 1.0695 suggests a weakening of bearish sentiment.

EUR/USD recovers its recent losses registered in the previous session, trading around 1.0710 during the Asian session on Thursday. From a technical standpoint, analysis suggests a weakening of bearish sentiment for the pair as it has surpassed the major level of 1.0695 and the psychological level of 1.0700.

Additionally, the lagging indicator Moving Average Convergence Divergence (MACD) indicates a shift in momentum for the EUR/USD pair, as it is positioned below the centerline but above the signal line. However, the 14-day Relative Strength Index (RSI) remains below the 50-mark, indicating a continuation of bearish momentum.

Key support for the EUR/USD pair is likely to be found around the psychological level of 1.0700. A breach below this level could apply downward pressure on the pair, potentially leading it toward the region surrounding the major support level of 1.0650. Further support may be identified around April’s low at 1.0601, which aligns with the psychological level of 1.0600.

On the upside, the immediate barrier for the pair could be the 21-day Exponential Moving Average (EMA) at 1.0727. A breakthrough above this level could propel the pair towards the 38.2% Fibonacci retracement level at 1.0749, which is drawn between the levels of 1.0981 and 1.0606, coinciding with the major level of 1.0750.

EUR/USD: Daily Chart

• EUR/USD posts modest gains near 1.0700 on the weaker USD on Thursday. 
• US Durable Goods Orders increased by 2.6% MoM in March vs. 0.7% prior; Core Goods rose by 0.2% MoM, worse than expected. 
• The dovish stance of the ECB, which sticks to plans to cut interest rates this year, weighs on the Euro.
• Traders will monitor the release of US Q1 GDP growth number data.

The EUR/USD pair hovers around the 1.0700 psychological level on Thursday during the early Asian session. The modest uptick of the major pair is supported by the softer US Dollar (USD). Later in the day, Germany’s GfK Consumer Confidence Survey for April will be released. Additionally, the US preliminary Gross Domestic Product (GDP) growth number will be due. 

The US Department of Commerce revealed on Wednesday that Durable Goods Orders in the United States increased 2.6% MoM in March from a 0.7% rise in the previous reading, beating the estimation of 2.5%. Core goods, which excluded transportation, rose by 0.2% MoM, missing the expectation of 0.3%. 

The release of US GDP for the first quarter could offer clues of how strong the economy is growing and point to the Fed's next move. If the report shows stronger-than-expected data, this might trigger speculation that the Fed will delay the rate cut cycle and boost the Greenback. Markets have priced in nearly 70% odds that the US Federal Reserve (Fed) will cut its benchmark rate in September, according to the CME FedWatch tool,

Across the pond, the European Central Bank (ECB) policymakers stick to plans to cut interest rates this year, even though elevated US inflation might delay a pivot to looser policy by the Fed. The ECB President Christine Lagarde suggested that the central bank may cut its deposit rate from a record-high 4% in June, but has kept its options open for further action. The dovish stance of the ECB exerts some selling pressure on the Euro (EUR) and creates a headwind for the EUR/USD pair. 

• EUR/USD maintains a position slightly above 1.0700, with minimal change despite a strong recovery in the US Dollar.
• US Treasury yields increase after significant durable goods data and a major five-year note sale, impacting market sentiment.
• Upcoming US GDP and Core PCE data, along with German consumer confidence figures, are next on the economic calendar.

The Euro is steady against the US Dollar, virtually unchanged after solid data from the United States (US) boosted the Greenback, which recovered from Tuesday's losses. However, the EUR/USD stands below the 1.0700 threshold posting minimal gains of 0.01%.

EUR/USD is flatlined ahead of crucial US GDP and inflation data

The market mood shifted sour as the US Treasury yields edged up after a record $70 billion sale of five-year notes in the US fixed-income market. In the meantime, the US Department of Commerce showed that US Durable Goods Orders increased in March, expanding by 2.6% MoM, up from a 0.7% rise previously and surpassing 2.5% estimates. Core goods, which excluded transportation, increased by 0.2% MoM, an improvement over February's 0.1% increase, but fell short of the 0.3% projected.

Today’s data contrasts with Tuesday’s S&P Global PMI figures in the US. Although business activity has eased somewhat, Goods Orders figures crushed February’s figures, signaling the economy remains strong.

On Thursday, the US Bureau of Economic Analysis (BEA) will reveal the Gross Domestic Product (GDP) for the first quarter of 2024, estimated at 2.5%, down from 3.4% in Q4 2023. At the same time, Initial Jobless Claims are expected to increase from 212K to 214K.

Besides that, EUR/USD traders would be eyeing the release of the Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, which is estimated to remain steady at 0.3%. The annual Core PCE rate is expected to ease to 2.6%, down from February's rate of 2.8%, indicating a potential softening of inflation pressure.

Across the pond, traders would be eyeing the release of Germany’s GfK Consumer Confidence for May, projected to improve from -27.4 to -25.9.

EUR/USD Price Analysis: Technical outlook

Even though the EUR/USD seems to have bottomed at around 1.0600, buyers' failure to achieve a daily close above 1.0700 could pave the way for a re-test of the year-to-date (YTD) low at 1.0601. In that event, a breach of the latter, will expose a key support level at 1.0448, the October 3, 2023, swing low. On the upside, if buyers keep the spot price above 1.0700, look for a test of the psychological 1.0750 before aiming toward the confluence of the 50 and 200-DMA.

• EUR/USD climbs above the key 1.0700 psychological level early on Wednesday. 
• Weaker-than-expected US PMI data on Tuesday undermined the US Dollar and fueled the recovery. 
• EUR/USD’s Bear Flag pattern deforms, bringing into doubt its validity. 

EUR/USD trades just shy of 1.0700 on Wednesday after weaker-than-expected private sector growth and US business activity dent the myth of US economic exceptionalism, weighing on the US Dollar (USD).

EUR/USD gains a further small bump after the release of positive German economic sentiment IFO survey data for April shows a greater-than-expected rise in the Business Climate (89.4) and Current Assessment (88.9) components, whilst Expectations increases to 89.9 in line with estimates. 

EUR/USD recovers on weaker-than-expected US data

EUR/USD broke above the top of its seven-day range early on Wednesday after the Greenback lost favor with traders. The Euro (EUR), meanwhile, maintained its value on the back of growth in the Services sector revealed in Tuesday’s better-than-expected HCOB Eurozone Services PMI data for April. 

In comparison, the PMI indexes from the US fell for both Services and Manufacturing in April, which took investors by surprise and suggested the economy is not coping as well as previously thought under the yoke of relatively high interest rates.

Stubborn price momentum in the services sector in both the US and Europe have delayed the time by which both the Federal Reserve (Fed) and European Central Bank (ECB) are expected to cut interest rates. Whilst ECB officials seem fairly united in wanting to cut the ECB’s base lending rate in June, Fed officials have become increasingly vague about when they might consider cutting interest rates. 

Since the expectation of lower interest rates depreciates a currency, the lack of commitment of Fed officials compared to their ECB colleagues has been the main catalyst behind the US Dollar’s outperformance over recent weeks, and EUR/USD’s bearish momentum.  

The higher-than-expected preliminary Services PMI data in the Eurozone revealed on Tuesday, however, introduces some doubt into confidence that the ECB will in fact go ahead with rate cuts in June. 

On Wednesday, ECB governing council member and Bundesbank President Joachim Nagel reflected this doubt, saying “Services inflation remains high, driven by continued strong wage growth,” and because of this he was not convinced inflation was falling in a sustainable manner and, therefore, could not “pre-commit to a particular rate path.”

It means more weight will be given to the defining data point for the decision, which is – according to the ECB President Christine Lagarde – first quarter Eurozone wage growth data. 

EUR/USD traders will now assess commentary from ECB officials on Wednesday. Meanwhile in the US, Durable Goods data will pad out the portrait of how well “Captain American Economy” is doing when it is released during the US session. 

Technical Analysis: EUR/USD pierces top of short-term range

EUR/USD breaks out of the box-like range it had been trading in for the last seven days and pierces above the key 1.0700 level to bring into doubt the durability of the short-term downtrend. 

It is now less certain EUR/USD is forming a Bear Flag price pattern as had previously been assumed. The pattern has quite bearish connotations with a potential downside target in the 1.0400s, so if it fails to activate the pair could reverse on the disappointment, with some short-covering adding fuel to the recovery. 

EUR/USD 4-hour Chart

With the short-term downtrend in doubt more upside is possible, with the next target at resistance from the previous lower high providing an initial target at 1.0758. After that, the 50-day and 200-day Simple Moving Averages (SMA) provide resistance at 1.0807 on the daily chart (not shown).

A break below the 1.0601 April 16 low, however, would prove the Bear Flag hypothesis valid in the end and signal the start of a decline. 

According to technical lore, the expected move out of a Bear Flag usually equals the length of the “pole” or steep decline preceding the box-like formation of the flag square, or a Fibonacci ratio of the pole. 

The Fibonacci 0.618 ratio of the pole extrapolated lower provides the most reliable conservative target. This gives a price objective at 1.0503.  After that, the next concrete target is at 1.0446 – the October 2023 low. A fall of equal length to the pole would take EUR/USD  down to 1.0403. 

• EUR/USD holds positive ground around 1.0705 in Wednesday’s early European session. 
• The pair keeps the bearish vibe unchanged below the key EMA.
• The first upside barrier is seen at the 1.0710–1.0715 region; the first downside target is located at 1.0638.

The EUR/USD pair trades in positive territory for the fourth consecutive day near 1.0705 on Wednesday during the early European trading hours. The recovery of the major pair is bolstered by the downbeat US April PMI data, which weighs on the Greenback. Later in the day, Germany’s IFO business sentiment index and Expectations will be published. On the US docket, the US March Durable Goods Orders will be released. 

Technically, the bearish trend of EUR/USD remains intact on the four-hour chart, as the major pair is below the key 100-period Exponential Moving Average (EMA). In the event that the EUR/USD pair crosses above the key 100-period EMA, it will resume its upside. It’s worth noting that the Relative Strength Index (RSI) stands in bullish territory around 66, suggesting that further upside cannot be ruled out. 

A decisive break above the upper boundary of the Bollinger Band and the 100-period EMA in the 1.0710-1.0715 zone will see a rally to a high of April 11 at 1.0756. The next key upside barrier is seen at the confluence of a low of March 22 and a psychological level at 1.0800. The additional upside filter to watch is a high of April 4 at 1.0875.

On the other hand, the first downside target is located near a low of April 23 at 1.0638. Any follow-through selling below the latter will see a drop to the lower limit of the Bollinger Band at 1.0625. A breach of this level will expose a low of November 2 at 1.0565.

EUR/USD four-hour chart

• EUR/USD hovers around 1.0700 on Wednesday amid the weaker US Dollar. 
• The Eurozone flash PMI showed the economy gained recovery momentum in April. 
• S&P Global suggested US business activity continue to expand in April, albeit at a softer pace than in March.

The EUR/USD pair holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for EUR/USD. Investors will take more cues from Germany’s IFO business sentiment index and Expectations, along with the US March Durable Goods Orders. 

Overall business activity in the Eurozone expanded at its fastest pace in almost a year in April, with a robust rebound in the bloc's major service sector, according to the HCOB's latest Purchasing Managers Index (PMI) survey released on Tuesday. The HCOB Eurozone PMI Composite improved to 51.4 in April from March’s reading of 50.3, better than the estimation of 50.8. The reading registered the highest level in nine months. 

Meanwhile, the bloc’s Services PMI hit a fresh eleven-month high, rising to 52.9 in April from 51.5 in March, beating market expectations of 51.8. The Eurozone Manufacturing PMI came in at 45.6 in April, compared to the 46.1 reading in March, weaker than the 46.5 expected. In response to the data, the Euro (EUR) attracts some buyers against the Greenback. However, the dovish stance of the European Central Bank (ECB) might limit the major pair’s upside. 

The ECB policymakers emphasized the need to cut interest rates multiple times this year, even though elevated US inflation delays a pivot to looser policy by the US Federal Reserve (Fed) and tensions in the Middle East keep oil prices high. The ECB President Christine Lagarde suggested that the central bank may cut its deposit rate from a record-high 4% in June, but has kept its options open for further action. 
 
On Tuesday, the US preliminary S&P Global Composite PMI, which tracks both the manufacturing and services sectors, fell to 50.9 in April from the previous reading of 52.1. Meanwhile, the Manufacturing PMI dropped to 49.9 in April from 51.9 in the previous reading, weaker than the estimation of 52.0. The Services PMI decreased to 50.9, compared to 51.7 prior, worse than the 52.0 expected. The reports indicated that business activity in the United States continued to expand in April, albeit at a softer pace than in March. The downbeat data weighs on the US Dollar (USD) and caps the upside of EUR/USD.

• EUR/USD gains 0.40%, breaching resistance amid disappointing US manufacturing and composite indices.
• ECB's Joachim Nagel emphasizes inflation targets before any potential rate cuts despite slowing inflation.
• Upcoming economic indicators include US Durable Goods, Q1 GDP, and Eurozone business confidence reports.

During Tuesday's North American session, the Euro appreciated against the US Dollar, up by more than 0.40%, and exchanged hands above a key resistance level. Softer than expected, US economic data weighed on the Greenback, which trades with losses against most G8 currencies. The EUR/USD trades at 1.0705 after reaching a low of 1.0638.

EUR/USD climbs to 1.0705 following worse than expected US manufacturing data

Recently, Bundesbank President and European Central Bank (ECB) member Joachim Nagel stated that the ECB must be convinced that inflation heads to its 2% goal before cutting rates. This is because most ECB policymakers have opened the door to easing policy due to the slowdown in inflation.

Aside from this, data from the United States (US), revealed by S&P Global on Tuesday, showed that business activity in the manufacturing sector shrank. The Manufacturing PMI slipped from 51.9 to 49.9 this month. On the other hand, the Services and Composite Index decelerated from 51.7 and 52.1 to 50.9, in both readings.

Other data showed that New Home Sales jumped to a six-month high, according to the US Department of Commerce, while Building Permits remained in contractionary territory despite being revised up from -4.3% to -3.7%.

In the meantime, the US economy continues to outperform its peers amid 525 basis points of rate hikes by the Fed since March 2022. Next week, the Fed will meet, and interest rates are expected to remain unchanged. Last week, the Fed parade witnessed policymakers pushing against three rate cuts, with most officials expecting just two or one.

Across the pond, Eurozone HCOB PMIs were solid, with the composite index rising from March’s 50.3 to 51.4 this month, while the services edged up from 51.5 to 52.9. the outlier was the Manufacturing PMI, slipping from 46.1 to 45.6

What should be watched ahead for EUR/USD traders?

In the US, Durable Goods Orders, the Gross Domestic Product (GDP) for Q1 2024, and the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure Price Index (PCE). On the Eurozone front, Germany’s Ifo Business Climate, Italy’s Business and Consumer Confidence, followed by Germany’s GfK Consumer Confidence.

EUR/USD Price Analysis: Technical outlook

From a technical standpoint, EUR/USD traders, despite reclaiming the 1.0700 figure, further downside is seen. If buyers achieve a daily close above the latter, that could pave the way to aim toward 1.0800, capped by the confluence of the 50 and 200-day moving averages (DMAs) at 1.0806/11. Otherwise, if the major prints a close beneath 1.0700, look for a retracement to 1.0600.

• EUR/USD trades in a range in the mid 1.0600s ahead of key PMI data for the US and Eurozone. 
• The pair has formed a Bear Flag price pattern suggesting the potential for a steep decline. 

EUR/USD extends its holding pattern of the last few days, trading in the mid 1.0600s on Tuesday, prior to the release of potentially market-moving purchasing manager survey data. 

Preliminary Purchasing Manager Indexes (PMI) for April in both the United States and Europe are scheduled for release later in the day and could impact the exchange rate.   

EUR/USD: Traders await Purchasing Manager data 

EUR/USD could potentially experience volatility after the release of HCOB PMIs for the Eurozone followed by S&P Global PMIs for America, during the US session. 

The HCOB Composite PMI for the Eurozone is forecast to rise to 50.8 from 50.3 in March, the HCOB Manufacturing PMI to 46.5 from 46.1 and the HCOB Services PMI to 51.8 from 51.5. 

The S&P Global Manufacturing PMI for the US in April is forecast to rise to 52.0 from 51.9 and Services to 52.0 from 51.7. 

A PMI figure above 50 is indicative of growth in the sector; below 50 contraction. If any of the data show higher-than-expected readings, they could benefit the respective currencies and vice versa for lower-than-forecast results. 

Of particular interest to currency traders will be Services PMIs since sticky inflation in the sector has been a major contributor to inflation, especially in the US. 

Continued high inflation in the US is viewed as likely to keep interest rates relatively elevated in the United States compared to Europe. The expectation of higher borrowing costs for longer in the US has been bolstering the US Dollar (USD) since higher interest rates attract greater capital inflows. 

In addition, later in the day, the US will also see the release of New Home Sales data for March and the Richmond Fed Manufacturing Index for April.

Technical Analysis: EUR/USD forms a Bear Flag

EUR/USD is trading in a rectangular range at roughly the same level as the 100-week Simple Moving Average (SMA). 

Taken together with the steep decline that preceded the rectangle, the whole formation resembles a Bear Flag price pattern, which has bearish connotations. 

EUR/USD 4-hour Chart

A break below the 1.0601 April 16 low would signal a probable activation of the Bear Flag and the start of a decline. 

According to technical lore, the expected move out of a Bear Flag usually equals the length of the “pole” or steep decline preceding the box-like formation of the flag square, or a Fibonacci ratio of the pole. 

The Fibonacci 0.618 ratio of the pole extrapolated lower provides the most reliable conservative target. This gives a price objective at 1.0503.  After that, the next concrete target is at 1.0446 – the October 2023 low. A fall of equal length to the pole would take EUR/USD  down to 1.0403. 

The Relative Strength Index (RSI) has exited oversold conditions, indicating renewed potential for more downside. 

For bulls, resistance at around 1.0700 will need to be overcome to have any hope of recovery. After that, the April 2 swing low at 1.0725 provides the next upside target, followed by 1.0800, where a cluster of major Moving Averages coils.

• EUR/USD remains tepid around the major level amid a bearish sentiment.
• A breach below the 1.0600 level may lead the pair toward November’s low at 1.0517.
• The nine-day EMA at 1.0675 appears as the immediate barrier.

EUR/USD remains lackluster during the Asian trading hours on Tuesday, hovering near 1.0650. From a technical perspective, analysis suggests a bearish sentiment for the pair as it struggles below the pullback resistance at the 1.0695 level. The 14-day Relative Strength Index (RSI) also remains below the 50 mark.

Moreover, the lagging indicator, Moving Average Convergence Divergence (MACD), indicates weakness for the EUR/USD pair as it resides below the centerline and the signal line. Key support for the pair could be found around the psychological level of 1.0600.

A breach below this level may exert downward pressure on the pair, leading it towards the region around the major support level of 1.0550, followed by November’s low at 1.0517.

On the upside, the immediate barrier for the EUR/USD pair could be the nine-day Exponential Moving Average (EMA) at 1.0675. A breakthrough above this level could lead the pair to reach the 1.0695 level, aligning with the 23.6% Fibonacci retracement level drawn between 1.0981 and 1.0606.

Further resistance aligns with the psychological level of 1.0700. A breakthrough above this region could potentially strengthen the recovery sentiment for the pair.

EUR/USD: Daily Chart

• PMI activity data due on both sides of the Atlantic.
• EUR/USD finds middle ground just below 1.0700.
• Markets looking for moderate recovery across the PMI board.

The EUR/USD is testing the waters near 1.0650 after a quiet Monday saw the major pair flatline ahead of a densely-packed economic data docket. Both the US and the wider Eurozone area will see updates to Purchasing Managers Index (PMI) figures on Tuesday, with high-tier US data due in the back half of the trading week as rate-hungry markets continue to froth for rate cuts from the US Federal Reserve (Fed).

Tuesday brings pan-Eurozone HCOB PMIs for April, with the Composite PMI expected to recover to 50.8 in April compared to the previous month’s 50.3. Germany’s Composite PMI is also expected to climb further to 48.6 from the previous 47.7. The broader European Manufacturing PMI is expected to remain in contraction territory but recover ground to 46.5 from the previous 46.1.

On the US side, the S&P Global PMI for April is expected to print at 52.0 for both the Manufacturing and Services components. Manufacturing was last seen at 51.9, while Services last printed at 51.7 in March.

Later this week, US annualized quarterly Gross Domestic Product (GDP) is expected to ease back to 2.5% from the previous print of 3.4%, while March’s Core Personal Consumption Expenditure (PCE) Price Index is expected to hold steady at 0.3% MoM in April.

EUR/USD technical outlook

The EUR/USD pair is holding steady near 1.0650 after a recent tumble from the 1.0880 level, with the Fiber sliding 2.62% peak-to-trough in April. A limited recover from near-term lows just above the 1.0600 handle leaves the pair struggling on the low side of the 200-hour Exponential Moving Average (EMA) as price action looks for a floor.

Daily candlesticks see the way open for an extended decline into the last major swing low near 1.0500, but recent price action could drag the EUR/USD back into the 200-day EMA at 1.0807.

EUR/USD hourly chart

EUR/USD daily chart

• Euro recovery stalls below 1.0700, and remains dangerously close to the 1.0610 low.
• A combination of the Fed’s “higher for longer” with hopes of ECB easing is weighing on the Euro.
• This week the US GDP and PCE Prices Index figures might give a fresh boost to the USD.

Euro bears remain in control on Monday, as the pair wavers without a clear direction, with upside attempts capped below 1.0700. This is a previous support turned resistance and keeps the five-months low, 1.0610 at a dangerously close distance.

The economic calendar has been light today, but the unexpected deterioration of the Eurozone Consumer Confidence Index has not helped to increase demand for the Euro. On Tuesday the preliminary HCOB manufacturing and Services PMI might set the pair’s near-term direction.

A hawkish Fed and a dovish ECB are weighing on the pair

In the mid-term, the Euro is expected to remain on the defensive on the diverging monetary policy outlook of the Fed and the ECB. Recent data has reinforced the US “no-landing” view, forcing the Federal Reserve to delay and downsize its easing plans for 2024.

The ECB, on the contrary, has been giving hints of a rate cut in June. This would put the bank amid the first of the major central banks to start rolling back its tightening cycle, which will likely keep Euro buyers at bay.

In the US the first quarter GDP data, due on Thursday, and Friday’s PCE Prices Index will be key to understanding the Fed’s monetary policy plans. Another batch of strong releases is likely to boat the USD and send the  Euro exploring fresh year-to-date lows sub-1.0600.

• EUR/USD finds support from a lack of escalation in the Israel-Iran conflict. 
• Diverging interest rate expectations are an overall bearish factor however. 
• EUR/USD may be forming a Bear Flag price pattern. 

EUR/USD continues to trade within a contained box-like range, up a marginal tenth of a percentage point in the 1.0660s on Monday. 

A lack of escalation in the Israel-Iran conflict has led to an unwinding in geopolitical risk, which has reduced demand for the safe-haven US Dollar and provided EUR/USD with a slight lift. 

Most analysts are bearish EUR/USD, however, because of a diverging outlook for future path of interest rates – a key FX driver – in the US as compared to Europe.

EUR/USD doomed by diverging interest rates

EUR/USD is expected to continue weakening by many experts because of the comparative outlook for interest rates, which drive capital flows. Interest rates are expected to remain higher in the US compared to Europe, making it a more attractive place to store capital, thereby increasing inflows and Dollar-demand. 

On the US side, stubbornly high inflation, a robust jobs market and strong economic growth are all reasons to keep interest rates at their current level (5.25%-5.50%).

“It is hard to find any reasons to bet against the Dollar,” said Michael Pfister, FX Analyst at Commerzbank in an interview with Bloomberg News on Monday. “We have seen an appreciation in the Greenback over the last two weeks on the back of an inflation surprise. On top of that we have a strong growth advantage and a very hawkish Fed,” added the analyst. 

Pfister sees the Federal Reserve (Fed) not making a first rate cut until December, which is a big change from expectations earlier this year, when the consensus was that the Fed would make its first interest rate cut in June. The Fed themselves, in their last Summary of Economic Projections (SEP), forecast about three 0.25% cuts over the whole of 2024. 

This contrasts with Europe, where disinflation has been stronger and economic activity weaker. Additionally, officials at the European Central Bank (ECB) which sets base lending rates for the entire region (currently at 4.5%), appear more united in advocating for a cut in June, compared to their colleagues across the Atlantic.  

“To be honest, I am often surprised that the Euro is not much weaker,” says Ulrich Leuchtmann, Head of FX and Commodity Research also at Commerzbank in a note on Monday. 

“Over the weekend, news services reported in advance on an interview with François Villeroy de Galhau, Governor of the Banque de France. According to these reports, Villeroy confirmed the ECB Governing Council's intention to cut interest rates at its meeting on June 6,” adds Leuchtmann. 

How low could the Euro go? When asked whether he saw EUR/USD falling all the way to parity, Pfister replied “Not quite as low as parity but we see EUR/USD probably falling to 1.0400.” 

Technical Analysis: EUR/USD forms potential Bear Flag

EUR/USD has been yo-yoing in a rectangular range since it bottomed at 1.0601 on April 16. The range is roughly at the level of the 100-week Simple Moving Average (SMA). 

Taken together with the steep decline that preceded it, the rectangle resembles an almost-complete Bear Flag pattern on the 4-hour chart below. 

EUR/USD 4-hour Chart

A break below the 1.0601 April 16 low would signal a probable activation of the Bear Flag and the start of a deep decline. Technical analysts forecast the move out of a Bear Flag as equal to the length of the “pole” or the steep decline preceding the box-like formation of the flag square, or a Fibonacci ratio of the pole. 

The Fibonacci 0.618 ratio of the pole extrapolated lower provides the most reliable conservative target. This gives a price objective at 1.0503.  After that, the next concrete target is at 1.0446 – the October 2023 low. A fall of equal length to the pole would take the exchange rate all the way down to 1.0403. 

The Relative Strength Index (RSI) has exited oversold conditions, indicating renewed potential for more downside. 

For bulls, resistance at around 1.0700 will need to be overcome to have any hope of recovery. After that, the April 2 swing low at 1.0725 provides the next upside target followed by 1.0800, where a cluster of major Moving Averages coils.

• EUR/USD rebounds to 1.0665 amid the modest decline of the US Dollar. 
• Several ECB policymakers favor high-interest rates for longer. 
• Fed's Goolsbee said inflation progress had stalled and the Fed’s current restrictive policy is appropriate.

The EUR/USD pair trades on a stronger note around 1.0665 during the early Asian session on Monday. However, the pair’s upside might be limited due to the commentary from Federal Reserve (Fed) officials suggesting a shift to an increasingly hawkish stance. Investors will keep an eye on the preliminary Eurozone HCOB PMI for April on Tuesday ahead of the final reading of the US March Personal Consumption Expenditures Price Index (PCE) on Friday. 

The European Central Bank (ECB) is expected to hold rates steady in its June meeting. The ECB delivered a firm message that markets should expect an interest rate cut soon if we don’t have a major shock in development. Meanwhile, François Villeroy de Galhau, governor of the Bank of France, stated the ECB should cut in June so that higher rates do not cause too much damage to the euro area economy. Joachim Nagel, president of Germany’s Bundesbank, commented that the “probability of June rate cut is increasing, adding that there were caveats, including the risk of higher oil prices.

However, ECB Governing Council member Madis Muller said that the central bank mustn’t rush into further interest rate cuts after a likely first step in June. Additionally, ECB policymaker Robert Holzmann, one of the most hawkish members, flagged geopolitical tensions as the biggest threat to interest rate cuts this year. The lower bets on rate cut expectations provide some support to the Euro (EUR) and 

On the other hand, the hawkish remarks from the Federal Reserve (Fed) officials and the ongoing geopolitical tensions in the Middle East could lift the Greenback against its rivals. Chicago Fed President Austan Goolsbee said on Friday that inflation progress had “stalled” and the Fed’s current restrictive policy is appropriate. While Atlanta Fed Raphael Bostic stated that the US central bank wouldn’t cut rates until the end of the year. 

• The Euro remains contained above 1.0600 support yet with bullish attempts capped below 1.0690
• The broader bias remains unchanged, with the pair on a bearish trend from early March highs near 1.1000.
• The diverging ECB - Fed monetary policy outlook is expected to keep the pair under pressure.

Euro bears have been contained at 1.0605 support area this week, but the pair remained trading sideways, with upside attempts capped below 1.0690. The pair is on track to close the week little changed, following a 1.8% sell-off in the previous week.

A somewhat softer US Dollar has given the common currency some oxygen on Friday, although the broader bearish trend remains unchanged. The diverging monetary policy outlook between the ECB and the Fed is expected to weigh on the pair.

This week’s data has endorsed the view of a ‘no landing” in the US economy, which is strengthening the case for the Fed’s Hawkish sector. Earlier on Friday, Chicago Fed President Austen Goolsbee reiterated that the progress on inflation has stalled and that it will take longer than expected to achieve the 2% target. The Dollar has reacted with a moderate appreciation.

On the contrary, ECB’s President Lagarde suggested that interest rate cuts will likely come in June. This puts the European Central Bank in the unusual situation of acting ahead of the Fed, which is expected to keep the Euro under pressure.

• EUR/USD has recovered after an early sell-off due to news of an escalation in the conflict in the Middle East. 
• Israel purportedly launched drones at Iran in retaliation for its April 13 attack.
• EUR/USD is consolidating in a downtrend.  

EUR/USD is trading in the lower 1.0600s at the time of writing, after recovering slightly from an early bout of weakness. News reports of an escalation in the Middle East conflict had prompted a flight to the safe-haven US Dollar (USD), with a resulting decline in EUR/USD. 

Overnight, reports of explosions in the Iranian city of Isfahan, which houses a military barracks, according to Reuters, suggested Israel has retaliated against Iran for its April 13 drone attack. The escalation had a direct impact on markets, with demand for safe-havens assets – Gold, CHF, JPY and USD – ratcheting up. 

EUR/USD, which measures the number of US Dollars that can be bought with one Euro, fell back down to 1.0610 on the news, close to the 1.0601 April 16 year-to-date (YTD) low. Since then the exchange rate has recovered a bit, and is currently exchanging hands in the 1.0630s.   

EUR/USD pressured by ECB comments

EUR/USD started Thursday bullishly after the President of the European Central Bank (ECB) Christine Lagarde stated “The game (of fighting inflation) is not over,” suggesting perhaps some doubt as to whether it was time to start cutting interest rates. Given the maintenance of higher interest rates is positive for a currency since it attracts greater inflows of foreign capital, the Euro (EUR) strengthened following her remarks. 

EUR/USD reversed course after touching technical resistance just shy of 1.0700 and resumed its short-term downtrend as a roll-call of other ECB officials expressed the opposite view, i.e that cutting interest rates was necessary if not overdue. 

The President of the Banque de France and ECB governing council member François Villeroy de Galhau, for example, stated that a cut to borrowing costs was due, and delaying could be detrimental to growth, placing the ECB “behind the curve”. 

Vice-President of the ECB Luis de Guindos was more tempered, saying the central bank would reduce rates if the data evolved as expected. ECB governing council member Joachim Nagel said a June rate cut appeared increasingly likely, although certain inflation data remained higher than expected. 

Fed members adopt increasingly hawkish line

EUR/USD’s reversal lower on Thursday gained momentum after the release of the Philadelphia Fed Manufacturing Survey’s Index Prices Paid component – a regional inflation metric – shot up unexpectedly to 23.00 (prior 3.7), suggesting price pressures remain alive and kicking. 

Flat Initial Jobless Claims further reinforced the view that the US labor market is likely to continue to be a source of inflation. 

Commentary from Federal Reserve rate-setters suggested a shift to an increasingly hawkish stance (meaning in favor of high interest rates for longer). 

Atlanta Fed President Raphael Bostic said US inflation is returning to the Fed’s 2.0% target at a slower pace than many had anticipated, adding he’d be comfortable being patient, and that interest rate cuts are likely – but not until year end. 

New York Fed President John Williams went further, saying he didn’t feel an urgency to cut interest rates and that monetary policy is in a good place.

Technical Analysis: EUR/USD consolidates within a bear trend

EUR/USD seems to be messing around in the gap between the YTD lows at 1.0601 and the resistance from the last major swing low in February at just shy of 1.0700. 

The short and medium-term trends are bearish, suggesting more weakness will eventually come.  

EUR/USD Daily Chart

The Relative Strength Index (RSI) has exited oversold conditions, indicating renewed potential for more downside. 

A break below the 1.0601 April lows would post a lower low and give renewed confidence to bears. After that, the next concrete target is at 1.0446, the October 2023 low. 

Resistance at around 1.0700 will need to be overcome for bulls to reappear. In the case of a really bullish move, the April 2 swing low at 1.0725 provides the next upside target followed by 1.0800, where a cluster of major Moving Averages coils.

• EUR/USD remains under selling pressure near 1.0640 on the stronger USD on Friday.
• Fed’s Bostic said US inflation is expected to return to target at a slower pace than previously anticipated.
• ECB policymakers noted the central bank should cut rates in June to avoid falling behind the inflation curve.

The EUR/USD pair extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday during the early Asian session. The hawkish comments from Federal Reserve (Fed) officials provide some support to the US Dollar (USD). Later in the day, Chicago Fed Austan Goolsbee is set to speak.

On Thursday, the number of US citizens that filed new claims for unemployment benefits rose by 212K for the week ending April 13 from the previous weekly gain of 212K (revised from 211K). This figure came in below the market consensus of 215K, according to the US Department of Labor. The report indicated that the labor market remains resilient and investors expect that the US Fed might delay cutting interest rates until September.

Fed Chair Jerome Powell noted on Tuesday that monetary policy needed to be restrictive for longer as inflation continued to surprise on the upside in the first three months of the year. Atlanta Fed President Raphael Bostic said on Thursday that US inflation is expected to return to the 2% target at a slower pace than many had anticipated. Bostic added that he’s comfortable being patient and rate cuts are likely by year end. Meanwhile, New York Fed President John Williams said that he doesn't feel an urgency to cut rates and that monetary policy is in a good place. The strong US economic data and the higher-for-longer US rate narrative continue to lift the Greenback and act as a headwind for the EUR/USD pair.

Across the pond, the European Central Bank (ECB) signaled that it might start cutting the interest rate in June. ECB Vice President Luis de Guindos said on Thursday that the central bank will be ready to reduce the restrictions on its monetary policy stance if the data evolves as it expects. The ECB policymaker François Villeroy de Galhau emphasized that the ECB should cut interest rates in June to avoid falling behind the inflation curve.

Elsewhere, ECB policymaker Joachim Nagel said a June rate cut appeared increasingly likely, although certain inflation data remains higher than expected. The growing speculation that the ECB will begin to cut the interest rate earlier than the US Fed exerts some selling pressure on the Euro (EUR) and caps the EUR/USD’s upside for the time being.

• Euro recovery fails ahead of 1.0700 and ECB policymakers point to a June rate cut.
• In the US, strong employment levels and some hawkish comments by Fed’s Williams have provided a fresh boost to the USD.
• The EUR/USD remains vulnerable, dangerously close to the mid-term low at 1.0600.

The Euro recovery has been capped a few pips shy of the 1.0700 area, and the pair pulled lower on Thursday, to hit intra-day lows at 1.0645. The dovish comments by ECB policymakers and strong US data endorsing the Fed’s “higher for longer” outlook have weighed the common currency.

Earlier today ECB’s Vice-President Francoise Villeroy, affirmed that, barring a major surprise the bank will cut rates in June. These words have been echoed by the Governor of the Austrian central bank and notorious hawk, Robert Holzmann.

US data confirms the strong economic outlook

In the US, macroeconomic data has endorsed the picture of a strong economy with a tight labour market. Jobless claims remain steady at relatively low levels while a manufacturing activity gauge has reached its best reading in two years.

Beyond that, the New York Fed President, John Williams has reiterated that there is not an urgency to lower interest rates, which has sent US yields and the US Dollar up from intra-day lows.

The near-term bias remains neutral, with the pair unable to put a significant distance from five-month lows. 1.0700 is the immediate resistance, followed by 1.0730 and 1.0755. Support levels are 1.0605 and 1.0553.