- EUR/USD has extended its rally beyond 1.1000 early Thursday.
- The near-term technical outlook suggests that the pair could stage a correction.
- Weekly Jobless Claims and March PPI data will be featured in the US economic docket.
Following a relatively quiet Asian session, EUR/USD has regathered bullish momentum and climbed to its highest level since early February above 1.1000. The pair remains on track to renew 2023 highs above 1.1030 but the technical outlook suggests that there could be a downward correction before the next leg higher.
On Wednesday, the data from the US revealed that the annual inflation, as measured by the Consumer Price Index (CPI), declined to 5% in March from 6% in February. Although the Core CPI edged higher to 5.6% on a yearly basis with a monthly increase of 0.4% as expected, the US Dollar came under heavy selling pressure.
The CME Group FedWatch Tool shows that the probability of one more 25 basis points rate hike in May sits above 60% but markets now see an only 10% chance that the policy rate will remain at 5%-5.25% range by September.
In the second half of the day, the US Bureau of Labor Statistics will release the Producer Price Index (PPI) data for March. The US Department of Labor will publish the weekly Initial Jobless Claims as well.
The annual PPI is forecast to fall to 3% from 4.6% in February. An unexpected increase in that data could help the USD stage a rebound. On the other hand, a reading near the market expectation should make it difficult for the currency to find demand.
Meanwhile, the Euro Stoxx 50 Index and US stock index futures trade modestly higher on the day. Following Wednesday's choppy action, a rebound in Wall Street could put additional weight on the USD's shoulders and vice versa.
EUR/USD Technical Analysis
EUR/USD trades within the upper half of the ascending regression channel. The Relative Strength Index (RSI) indicator on the four-hour chart, however, stays in overbought territory above 70. In case the pair stages a technical correction, 1.1000 (psychological level, static level, mid-point of the ascending channel) aligns as immediate support before 1.0960 (static level, former resistance) and 1.0930 (lower limit of the ascending channel).
On the upside 1.1035 (2023-high) aligns as interim hurdle before 1.1050 (upper limit of the ascending channel) and 1.1100 (psychological level).
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