EUR/USD Forecast: Euro eyes 1.0660 as next recovery target

• EUR/USD has gained traction after having slumped below 1.0500 on Thursday.
• Hot EU inflation data and broad dollar weakness fuel the pair's rebound on Friday.
• Euro could target 1.0660 next if buyers managed to flip 1.0600 into support. 

EUR/USD started the last trading day of April on firm footing and has advanced beyond 1.0550 after having closed the previous six trading days in negative territory. The pair faces the next hurdle at 1.0600 and it could target 1.0660 next if that level turns into support. 

The heavy selling pressure surrounding the dollar and the latest data releases from the euro area help EUR/USD push higher early Friday.

Germany's Destatis announced that the German economy grew by 3.7% (YoY) in the first quarter, compared to analysts' estimate of 3.6%. More importantly, the annual Harmonised Index of Consumer Prices (HICP) in the euro area rose to 7.5% in April from 7.4% in March and the Core HICP jumped to 3.5% in the same period, surpassing the market expectation of 3.2%. 

In its Economic Bulleting published on Thursday, the European Central Bank noted that it's critical to continue to provide fiscal and monetary policy support amid the difficult geopolitical situation. Nevertheless, eurozone money markets price in a total of 90 bps of ECB rate hikes by December after hot inflation data.

In the second half of the day, the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, will be released alongside Personal Income and Personal Spending figures for March. Investors see the Core PCE Price Index, which excludes volatile food and energy prices, edging lower to 5.3% from 5.4% in February. A softer-than-expected inflation print could cause the dollar to continue to weaken ahead of the weekend. On the other hand, the dollar might still find it difficult to stage a rebound even if the data surprises to the upside. Month-end flows and profit-taking should help EUR/USD preserve its bullish momentum in the second half of the day. 

EUR/USD Technical Analysis

The Fibonacci 23.6% retracement of the latest trend seems to have formed a key resistance level at 1.0600. In case the pair rises above that level and makes a four-hour close there, the next recovery target could be seen at 1.0660 (Fibonacci 38.2% retracement) ahead of 1.0700 (Fibonacci 50% retracement, 50-period SMA on the four-hour chart).

Ideally, the Relative Strength Index (RSI) indicator, which is currently located at around 40, would rise above 50 in such a move, possibly attracting additional buyers. 

On the downside, interim support aligns at 1.0520 (static level) before 1.0500 (psychological level) and 1.0470 (multi-year low set on April 28).