- US Dollar remains weak despite higher yields, weighed by risk-off flows.
- Euro holds firm, helped by expectations of further rate hikes from the European Central Bank.
- EUR/USD rises for the second day in a row, constructive outlook.
The EUR/USD rose on Tuesday again. The slow move to the upside found resistance just below 1.0850, primarily driven by a weaker US Dollar. The pair continues to move with a bullish bias, but consolidative moves look set to prevail. The Euro continues to receive support from hawkish expectations regarding the European Central Bank (ECB). A 25 bps rate hike at the next meeting (May 4) is mostly priced in.
European banks avoided headlines on Tuesday, a sign that the banking crisis is easing. The tone across markets was positive in Europe but faded in Wall Street, where equity prices turned to the downside during the second half of the session. The deterioration in market sentiment helped the US Dollar stabilize. The Greenback was among the worst performers, even as US yields moved higher, with the 10-year holding above 3.50% and the 2-year at 4.05%.
Analysts await key inflation data while looking at development around the baking industry. Germany, France and Spain will report inflation figures on Thursday, the Eurozone on Friday. In the US, the following key report is due on Friday with the Core Personal Consumption Expenditure Price Index, the Federal Reserve’s preferred gauge of inflation. Data released on Tuesday showed consumer sentiment in the US improved modestly in March, with the Conference Board's Consumer Confidence Index increasing to 104.2 from 103.4 in February.
EUR/USD short-term technical outlook
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Despite the recent advance, the EUR/USD is still far from last week’s highs and technical indicators on the daily chart show no clear signs for the short term. The main trend is bullish and the price is well above key moving averages. Against this backdrop, more consolidation ahead between 1.0750 and 1.0900 seems likely.
The 4-hour chart shows EUR/USD retaining the bullish bias. The move higher lost momentum before the 1.0850 zone but the correction has been limited so far. The chart shows the 20-period Simple Moving Average (SMA) turning south, as well as the RSI. Indicators suggest a break above 1.0850 is not imminent and favor a correction on Asian hours. A strong support emerges around 1.0800, where the 20-period SMA stands. An uptrend line awaits at 1.0795, and a break lower would point to more weakness.
View Live Chart for the EUR/USD
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