- EUR/USD climbed to a fresh multi-week high above 1.0800.
- The US Dollar could stay under pressure on a soft inflation report.
- The near-term technical outlook points to overbought conditions.
EUR/USD gathered bullish momentum in the early American session on Tuesday and climbed above 1.0800. The pair extended its uptrend and touched its highest level since April 10 on Wednesday. Although the near-term technical outlook points to overbought conditions for the pair, buyers could retain control in case inflation data from the US come in below expectations.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.54% | -0.58% | 0.22% | -0.25% | -0.61% | -0.62% | -0.15% | |
| EUR | 0.54% | -0.09% | 0.76% | 0.26% | -0.11% | -0.11% | 0.37% | |
| GBP | 0.58% | 0.09% | 0.77% | 0.35% | -0.02% | -0.02% | 0.46% | |
| JPY | -0.22% | -0.76% | -0.77% | -0.50% | -0.81% | -0.91% | -0.35% | |
| CAD | 0.25% | -0.26% | -0.35% | 0.50% | -0.34% | -0.39% | 0.02% | |
| AUD | 0.61% | 0.11% | 0.02% | 0.81% | 0.34% | -0.10% | 0.48% | |
| NZD | 0.62% | 0.11% | 0.02% | 0.91% | 0.39% | 0.10% | 0.48% | |
| CHF | 0.15% | -0.37% | -0.46% | 0.35% | -0.02% | -0.48% | -0.48% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The US Bureau of Labor Statistics (BLS) reported on Tuesday that the Producer Price Index (PPI) rose 2.2% on a yearly basis in April, following the 1.8% increase recorded in March. This print matched the market expectation but failed to provide a lasting boost to the US Dollar (USD). Meanwhile, Federal Reserve (Fed) Chairman Jerome Powell reiterated that they might have to stick to the restrictive policy for longer than expected to bring inflation down toward the 2% target.
Later in the day, the BLS will release the Consumer Price Index (CPI) data for April. Markets expect the core CPI to rise 0.3% on a monthly basis. A reading of 0.4% or higher could cause investors to refrain from pricing in a rate cut in September and allow the USD to gather strength. On the other hand, a soft monthly core CPI print of 0.2% or lower could cause the USD selloff to pick up steam.
According to the CME FedWatch Tool, investors are currently pricing in a nearly 35% probability that the Fed will leave the policy rate unchanged in September. This market positioning suggests that the USD is facing a two-way risk ahead of the data release.
EUR/USD Technical Analysis
EUR/USD holds comfortably above 1.0790-1.0800, where the 50-day and the 200-day Simple Moving Averages (SMA) align. In the meantime, the Relative Strength Index (RSI) indicator on the 4-hour chart holds above 70, pointing to overbought conditions. Nevertheless, sellers are likely to remain on the sidelines in case 1.0790-1.0800 area holds as support.
On the upside, 1.0865 (static level) aligns as interim resistance before 1.0890-1.0900 (Fibonacci 78.6% retracement of the latest downtrend, psychological level) and 1.0960 (beginning point of the downtrend).
If the pair returns below 1.0790-1.0800 area and starts using it as resistance, sellers could take action. In this scenario, 1.0740-1.0750 (Fibonacci 38.2% retracement, 200-period Simple Moving Average (SMA) on the 4-hour chart) could be seen as next support.
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed May 15, 2024 12:30
Frequency: Monthly
Consensus: 3.4%
Previous: 3.5%
Source: US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.