EUR/USD eases from 50-DMA amid resurgent dollar demand, US inflation eyed

• EUR/USD’s upside breakout challenges the 50-DMA roadblock at 1.1181.
• The US dollar attempts a bounce amid broad risk-aversion, recovery in yields.
• Bullish RSI suggests any pullback could be short-lived, focus on US/EU inflation.

EUR/USD is feeling the pull of gravity, as the US dollar recovers lost ground across the board amid a risk-off market profile.

Chinese business activity returns to a contraction in March, accentuating concerns over China’s economic slowdown while the country battles the latest covid outbreak.

Further, Ukraine’s President Volodymyr Zelenskyy’s comments that the Ukrainian military is preparing for a new Russian offensive in the eastern region of the country also added to the dour mood, reviving the dollar’s safe-haven appeal.

Meanwhile, a recovery in the US Treasury yields across the curve also aids the renewed upside in the greenback, limiting EUR/USD’s gains.

On the euro side of the story, concerns over soaring inflation pushed the euro area peripheral yields through the roof, backing the rally in EUR/USD a day before. As for Thursday’s trading so far, the main currency pair is taking cues from the dollar’s price action and the broader market sentiment.

Although the downside in the spot could be limited amid the 5% slump in oil prices on reports of the US mulling a massive oil reserves release. Meanwhile, markets will look forward to the German Retail Sales and US PCE Inflation due later this Thursday for fresh trading opportunities. Friday’s Eurozone Preliminary inflation data and the US NFP report will also hold the key.

EUR/USD: Technical outlook

As observed on the daily chart, EUR/USD is retreating after facing stiff resistance at the downward-sloping 50-Daily Moving Average (SMA) at 1.1181.

The downturn in the 14-day Relative Strength Index (RSI) is backing the pullback in the price. Although the bullish potential remains intact, as the leading indicator is holding well above the midline. Acceptance above the latter will put the bearish 100-DMA at 1.1250 at risk.

If bulls face rejection at the 50-DMA, then a fresh downswing towards Wednesday’s low of 1.1082 could be in the offing. Ahead of that the 1.1100 round figure could be challenged.

EUR/USD: Daily chart

EUR/USD: Additional levels to consider