CFD Trading Rate Euro vs US Dollar (EURUSD)

• 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.

• EUR/USD recovers after Lagarde says “the game is not over” with inflation. 
• Slow economic growth and sticky inflation in the Eurozone could weigh on EUR/USD. 
• Federal Reserve Chairman Powell talks about keeping rates higher for longer, and longer.

EUR/USD is trading in the 1.0680s on Thursday, marginally higher on the day, building on the U-turn it began midweek after touching down at the 1.0601 lows of April. 

It is still too early to say whether EUR/USD is undergoing a correction of the downtrend or a reversal, given the strong bullish recovery so far – of 80 pips in 36 hours – keeps bullish hopes alive. 

EUR/USD rebound gains momentum on smidgin of doubt 

EUR/USD’s rebound got an added boost from comments by European Central Bank President Christine Lagarde, who said at a speech in Washington late on Wednesday that “The game (of fighting inflation) is not over,” despite adding, “Growth in Europe is mediocre, much slower than in the US. We’re clearly seeing timid signs of recovery.” 

Lagarde’s comments contrast a little with those of some of her ECB colleagues who have said inflation is behaving as it should and tracking nicely lower. It introduces a smidgen of doubt into whether the ECB really will start cutting interest rates in June as markets believe. The maintenance of higher interest rates for longer is positive for the Euro as it attracts more inflows of foreign capital.

Her remark about “Growth in Europe is mediocre,” echoes the view of Rabobank FX Strategists, who argue that whilst there is no risk of a “crisis” in the region, “ the combination of slow growth in the Eurozone and nagging budget pressures could lower the defenses of the EUR going forward." Rabobank suggests a fall to 1.0500 is probable, with risks tilted to the downside. 

EUR/USD pressured by talk of rates for longer in the US

EUR/USD plummeted at the start of April as bets the Federal Reserve (Fed) would cut interest rates in June quickly melted away amidst stickier-than-expected inflation and robust macroeconomic data. 

On Tuesday, Federal Reserve Chairman Jerome Powell said high interest rates would likely be around for longer than previously expected given the little progress being made on inflation in recent months. 

The Fed’s Beige Book, a comprehensive economic survey, on Tuesday repeated the view that little progress had been made on inflation but added that growth and employment were a little stronger than expected.

Everything points to the Fed maintaining interest rates at their relatively high (upper limit of 5.5% for the Fed Funds Rate) levels for a while until the behemoth of inflation is finally slain. 

Indeed, The CME FedWatch tool, a market gauge of the probability of Fed rate cuts, is showing only a 16% probability of a cut in June (from over 70% only a few weeks ago) whilst the odds of a cut by September are now around 70%.   

Technical Analysis: EUR/USD undertakes a youthful recovery

EUR/USD has undergone a volte-face after hitting a floor at 1.0601 on Tuesday (circled). The question now, as most technical questions are, is whether this is a reversal or just a pullback in an ongoing downtrend?

EUR/USD Daily Chart

Momentum has been strong in the short span of the recovery so far, and the Relative Strength Index (RSI) has moved out of oversold, giving a buy signal – another good sign. However, it is too early to draw conclusions. 

The intermediate-term downtrend is probably still in force and in the absence of further proof of a reversal, likely to resume and push the exchange rate lower again. 

Resistance from previous swing lows nearby at around 1.0700 could act as an obstacle to the recovery and see a rotation back down. The level will, in any case, offer technical resistance and provide a rallying point for bears even if their cause is doomed. 

A break below the 1.0601 April lows would post a lower low and indicate a continuation of the downtrend. After that, the next concrete target is at 1.0446, the October 2023 low.

• EUR/USD rebounds to 1.0688 amid the weaker US Dollar on Thursday. 
• The bearish outlook of the pair remains intact below the key 100-period EMA. 
• The first upside target is seen at 1.0700; the initial support level is located at 1.0622.

The EUR/USD pair extends its recovery near 1.0688 on Thursday during the early European trading hours. The rebound of the major pair is backed by the selling pressure in the US Dollar Index (DXY) to 105.78. However, the upside of EUR/USD might be limited as the market expected the European Central Bank to cut the interest rate in June, which weighs on the Euro (EUR) against the Greenback. 

From a technical perspective, EUR/USD keeps the bearish vibe unchanged on the four-hour chart as the major pair is below the key 100-period Exponential Moving Average (EMA). However, the Relative Strength Index (RSI) stands in bullish territory around 55, suggesting that further upside cannot be ruled out. 

The first upside barrier of the major pair will emerge near the 50-period EMA and round figure at 1.0700. The additional upside filter to watch is the 100-period EMA at 1.0745. Further north, the next hurdle is seen near a low of March 22 and psychological level at 1.0800, en route to a high of April 9 at 1.0885. 

On the flip side, the initial support level for the major pair is located near a low of April 12 at 1.0622. The next contention level to watch is the 1.0595–1.0600 zone, indicating the lower limit of the Bollinger Band and round mark. Any follow-through selling below the latter will pave the way to a low of November 2 at 1.0565.

EUR/USD four-hour chart

• EUR/USD posts modest gains near 1.0672 on the softer USD on Thursday. 
• Fed’s Powell said the central bank might take longer than expected to achieve the 2% target.
• ECB policymaker said a rate cut looks increasingly likely in its June meeting. 

The EUR/USD pair edges higher to 1.0672 on Thursday during the early Asian session. The recovery of that major pair is bolstered by renewed selling pressure in the US Dollar (USD) and a risk-friendly environment. Investors will monitor the usual weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, the CB Leading Index, and Existing Home Sales, due later on Thursday. 

The Federal Reserve's (Fed) rate cut hopes were faded. Fed Chairman Jerome Powell commented on Tuesday that the recent data have clearly not given Fed greater confidence and indicate that it's likely to take longer than expected to achieve the central bank's 2% target. The hawkish comments from the Fed’s Powell might provide some support to the Greenback and cap the upside of the EUR/USD in the near term. Investors see a nearly 71% chance that the Fed will cut interest rates in September, according to the CME FedWatch Tool.

On the other hand, investors increase their bets that the European Central Bank (ECB) will cut the interest rate in June. The ECB policymaker Joachim Nagel said on Wednesday that a rate cut looks increasingly likely for June, but certain parts of the incoming inflation data still look higher than desired. Meanwhile, ECB policymaker Bostjan Vasle said that the deposit rate should be lower to 3% by the end of the year from a record high of 4% currently if disinflation continues as expected. Interest rate differentials have been a primary driver of the major pair. The dovish stance from the ECB drags the Euro (EUR) lower and creates a headwind for the EUR/USD pair.  

• EUR/USD edges down ahead of HICP inflation data for the Eurozone. 
• Speeches by several key ECB governing council members could also impact EUR/USD. 
• EUR/USD enters oversold levels on the daily chart, indicating risk of a pullback. 

EUR/USD trades slightly down on Wednesday in the lower 1.0600s, as it clocks up a sixth consecutive day of losses. 

The pair is entering the oversold zone on charts, suggesting traders may be operating with more caution. Whilst this does not definitively indicate an end to the downtrend itself, it does up the odds of an upward correction potentially evolving on the horizon. 

In terms of volatility, the main events on the calendar for EUR/USD on Wednesday are the final estimates for Eurozone March inflation data, and several speeches by European Central Bank (ECB) officials.

EUR/USD: Traders await final estimates, ECB speeches

EUR/USD could see some volatility after the release of the final estimates for Eurozone March Inflation data at 9:00 GMT on Wednesday. Levels of inflation inform the decisions of the ECB regarding the setting of interest rates, a key driver in the FX markets.

If the revisions deviate from the initial estimates the pair may fluctuate.

Flash estimates for the Harmonized Index of Consumer Prices (HICP) in March, showed a 2.4% rise year-on-year, down from 2.6% previously. The final estimate is also expected to show 2.4%. 

The flash estimate for Core HICP showed a 2.9% rise YoY from 3.1% previous, and 0.8% month-on-month from 1.1% in February. Again, in both cases, the final estimate is expected to remain unchanged.  

Any deviation in the data, however, is likely to move EUR/USD. 

A lower-than-expected final estimate would solidify expectations that the ECB will go ahead and cut interest rates in the near-term, probably in June. Since lower interest rates, or their expectation, tend to reduce foreign capital inflows, such a result would probably depreciate to the Euro (EUR) and push down EUR/USD. 

If HICP is revised up, this might raise some doubt about whether the ECB will go ahead with a rate cut in June, which could strengthen the Euro and see EUR/USD recover. 

Speeches by key ECB members throughout the day, including ECB Executive Board Member Piero Cipollone, ECB Executive Board Member Isabel Schnabel and President Christine Lagarde herself could also impact the pair’s volatility. 

The case for an imminent cut in interest rates – the ECB’s key main refinancing operations rate stands at 4.50% – was strengthened on Tuesday after ECB President Christine Lagarde said that the ECB will cut rates soon, bar a surprise, and that the ECB was keeping a close eye on Oil prices due to tensions in the Middle East. 

Technical Analysis: EUR/USD bears are oversold

The EUR/USD pair is firmly in a downtrend on both its short and medium-term time frames, since peaking and rolling over at 1.1139 in December. 

EUR/USD Daily Chart

The downtrend thesis is supported by the fact that the pair is trading below all its key major moving averages – the 50-day, 100-day and 200-day Simple Moving Averages (SMA). 

It is making lower lows and lower highs and this trend is biased to continue – with one caveat. 

The Relative Strength Index (RSI) momentum indicator is flashing oversold on the daily chart. At the moment this is only a warning for short-traders not to add to their positions, however, if the RSI were to exit oversold and rise back above 30, it would be a sign the pair was correcting and for short-traders to close their positions and open longs. 

As things stand it is still possible the pair could continue lower and even if there is a correction the dominant downtrend is still likely to resume. The next key downside target for the pair is the 2023 lows at 1.0446. 

If a pullback evolves, meanwhile, a possible target could be the swing low at 1.0700.

• EUR/USD rebounds to 1.0625 in Wednesday’s early European session. 
• The pair keeps the negative outlook unchanged below the key EMA; RSI indicator holds in bearish territory.
• The initial support level is seen at the 1.0600–1.0605 zone; the immediate resistance level will emerge at 1.0710.

The EUR/USD pair posts modest gains around 1.0625 after bouncing off the fresh yearly low of 1.0600 on Wednesday during the early European trading hours. However, the further upside might be limited amid the hawkish comments from Federal Reserve (Fed) Chairman Jerome Powell and growing speculation that the European Central Bank (ECB) will start lowering interest rates in June. Investors await the Eurozone Harmonized Index of Consumer Prices (HICP) for March and ECB President Lagarde's speech for fresh catalysts. 

Technically, EUR/USD maintains the bearish stance unchanged as the major pair is below the key 100-period Exponential Moving Average (EMA) on the four-hour chart. The downward momentum is backed by the Relative Strength Index (RSI), which holds in bearish territory around 32, indicating that further downside looks favorable. 

The 1.0600–1.0605 region acts as an initial support level for the major pair, portraying the confluence of the lower limit of the Bollinger Band and psychological level. Further south, the next contention level to watch is a low of November 2 at 1.0565, followed by the 1.0500 round mark. 

On the upside, the immediate resistance level of EUR/USD will emerge near the 50-period EMA at 1.0710. The additional upside filter to watch is the 100-period EMA at 1.0756. A decisive break above this level will expose a low of March 22 and the round figure at 1.0800, en route to a high of April 9 at 1.0885. 

EUR/USD four-hour chart

• EUR/USD remains on the defensive around 1.0615 in Wednesday’s early Asian session. 
• Fed’s Powell said it's appropriate to allow restrictive policy to continue to work, given the strength of the labor market. 
• ECB’s Lagarde noted the central bank remains on course to cut rates in the near term, subject to any major shocks.

The EUR/USD pair extends its downside near 1.0620, bouncing off the Year-To-Date (YTD) low of 1.0600 during the early Asian session on Wednesday. However, the hawkish comments from the Federal Reserve (Fed) officials and the safe-haven flows might boost the US Dollar (USD) and cap the upside of EUR/USD in the near term. 

On Tuesday, Fed Chairman Jerome Powell said that the US economy's performance has been quite robust. Powell further stated that recent data indicates a lack of significant progress on inflation this year and it will take "longer than expected" to achieve the confidence that inflation will get down to the 2% target. A hawkish tilt by Fed’s Powell provides some support to the Greenback and drags the EUR/USD pair lower. 

About the data, Housing Starts in the US fell 14.7% in March to 1.32 million units from the previous reading of a 12.7% increase (revised from 10.7%). The US Building Permits dropped 4.3% from a rising 2.3% (revised from 1.9%) in February. Finally, Industrial Production rose 0.4% MoM in March, compared to the 0.4% increase recorded in February, in line with market expectation.

Across the pond, there is growing speculation that the European Central Bank (ECB) will start lowering interest rates in June due to a weak Eurozone economic outlook and cooling core inflationary pressures. ECB President Christine Lagarde said on Tuesday that the central bank remains on course to cut interest rates in the near term, subject to any major shocks. Lagarde added that the ECB will closely monitor oil prices amid the rising tensions in the Middle East. Later on Wednesday, the Eurozone Harmonized Index of Consumer Prices (HICP) for March will be due. Also, the ECB’s Cipollone, Schnabel and President Lagarde are set to speak. 

• EUR/USD drops to 1.0600 as the Fed is expected to pivot to rate cuts after the ECB.
• Eurozone’s weak economic outlook and cooling inflation fuel ECB rate cut bets.
• Fed policymakers emphasize keeping interest rates higher until they are sure about inflation returning sustainably to 2%.

The EUR/USD pair trades close to more than a five-month low near the round-level support of 1.0600 in the European session on Tuesday. The major currency pair is vulnerable to further downside as investors see the policy divergence between the Federal Reserve (Fed) and the European Central Bank (ECB) extending further.

Market expectations for the European Central Bank (ECB) to begin reducing interest rates from the June meeting have escalated. The weak Eurozone economic outlook and consecutive cooling core inflationary pressures for eight months have increased the likelihood of the ECB pivoting to rate cuts.

Last week, ECB President Christine Lagarde said if a fresh assessment increase policymakers' confidence that inflation is heading back to target, then it "would be appropriate" to cut interest rates, Reuters reported. ECB Lagarde delivered the statement in an interview post policy meeting in which the Main Refinancing Operations Rate was kept unchanged at 4.5%.

Meanwhile, traders have priced out expectations for Federal Reserve (Fed) rate cuts in the June and July policy meetings as core United States inflation remains stronger than expected in three months this year. This has strengthened the argument that the Fed should keep interest rates restrictive for a longer period.

Currently, investors expect that the Fed will start reducing interest rates from the September meeting. The Fed pivoting to rate cuts later than the ECB will stretch the policy divergence.

Going forward, speeches from various Fed policymakers will guide market expectations for Fed rate cuts. Fed policymakers are expected to support keeping interest rates higher until they are convinced that inflation will sustainably return to the desired rate of 2%.

• EUR/USD could test the support at the psychological level of 1.0600.
• The pair could extend losses to November’s low at 1.0516 as Technical analysis suggests a bearish confirmation.
• The area around the major level of 1.0650 and the 23.6% Fibo level of 1.0672 appears as the resistance zone.

EUR/USD continues its losing streak for the sixth successive session on Tuesday, hovering near 1.0620 during the Asian trading hours. The US Dollar's (USD) strength put pressure on the EUR/USD pair, possibly driven by increased US Treasury yields. Additionally, stronger-than-anticipated Retail Sales data from the US has raised expectations that the Federal Reserve (Fed) might prolong its stance on higher interest rates.

On the technical side, the analysis suggests a bearish sentiment for the EUR/USD pair as the 14-day Relative Strength Index (RSI) is positioned below the 50 mark. Additionally, the lagging indicator, Moving Average Convergence Divergence (MACD), lies below the centreline and shows a divergence below the signal line, which indicates weakness for the pair.

The EUR/USD pair could find immediate support around the psychological level of 1.0600. A break below this level could exert downward pressure on the pair to navigate the region around the major level of 1.0550, followed by November’s low at 1.0516.

On the upside, the major level 1.0650 appears as the key barrier, followed by the 23.6% Fibonacci retracement level of 1.0672. A breakthrough above the latter could lead the EUR/USD pair to explore the area around the psychological level of 1.0700 and the nine-day Exponential Moving Average (EMA) at 1.0715.

EUR/USD: Daily Chart

• EUR/USD extends its losing streak as the Fed is expected to maintain higher interest rates for an extended period.
• US Retail Sales (MoM) experienced a 0.7% increase in March, against the expected 0.3% and 0.9% prior.
• The dovish remarks from the ECB’s officials contribute to downward pressure on the Euro.

EUR/USD continues to lose ground for the sixth successive session, trading near 1.0610 during the Asian hours on Tuesday. The elevated US Dollar (USD) is exerting pressure on the EUR/USD pair, potentially influenced by the higher US Treasury yields. Furthermore, better-than-expected Retail Sales figures from the United States (US) have amplified expectations that the Federal Reserve (Fed) may maintain higher interest rates for an extended period.

US Dollar Index (DXY) extends its gains to near 106.20, with 2-year and 10-year yields on US Treasury bonds standing at 4.92% and 4.60%, respectively, at the time of writing. Escalating geopolitical tensions in the Middle East are prompting investors to flock towards the safe-haven US Dollar (USD) as a refuge.

US Retail Sales (MoM) increased by 0.7% in March, exceeding the market expectations of 0.3%. The previous reading was revised to 0.9% from 0.6% in February. Retail Sales Control Group rose by 1.1% against the previous increase of 0.3%.

Federal Reserve (Fed) Bank of San Francisco President Mary Daly recently stated that while there has been notable progress on inflation, there is still further ground to cover. She emphasized the importance of being confident that inflation is on a path toward the target before taking action. Daly also highlighted that the economy is experiencing solid growth, the labor market remains robust, and inflation is currently above the target level.

The Euro depreciates following dovish remarks from European Central Bank (ECB) officials on Monday. Gediminas Šimkus, a member of the ECB Governing Council, stated that there is a greater than 50% likelihood of witnessing more than three rate cuts this year, according to Reuters.

Additionally, ECB Chief Economist Philip Lane highlighted that there has been notably less progress concerning domestic inflation compared to broader inflation measures. Despite potential near-term fluctuations in the inflation outlook, the projected convergence of inflation to the target by 2025 remains supported.

• The Euro resumes its decline following strong US Retail Sales data
• The divergence between the ECB and the Fed's rate outlook is expected to weigh on the Euro.
• Geopolitical concerns are an additional support for the safe-haven USD.

The Euro’s mild upside bias seen during Monday’s European session has been hammered during US trading. The release of better-than-expected US Retail Sales has pushed US Treasury yields to fresh mid-term highs, bringing the US Dollar up with them.

Data released by the US Commerce Department revealed that retail consumption increased by 0.7% in March from 0.9% in February, beating expectations of a 0.3% rise. Excluding autos, total retail and food sales increased 1.1%, their best reading since January 2023.

Fed and ECB’s monetary divergence is weighing on the Euro

These figures highlight the strong US economic outlook and endorse the view that the Fed will have to keep rates at high levels for a longer time. This is underpinning demand for the USD.

The Eurozone context is the polar opposite, with inflation trending lower and the economy stalling. This has prompted the ECB to hint towards interest rate cuts, probably in June, putting the European Central Bank in the pole position for monetary easing and weighing on demand for the Euro.

Beyond that, investors’ concerns about an escalation of the Middle East conflict, as Israel weighs the options to retaliate from Iran’s missile attack is an additional support for the safe-haven US Dollar.