- US Dollar is mixed as equity prices move without clear direction ahead of a crucial week.
- European data indicate that consumer spending remains cautious.
- The EUR/USD pair hits six-day lows and rebounds toward 1.0700.
The EUR/USD dropped again on Tuesday but remains trading around the 1.0700 area on a quiet week as attention turns to next week's central bank meetings. Cautious markets favored the US Dollar on Tuesday.
The European Central Bank (ECB) is set to raise interest rates by 25 basis points next week and probably another hike in July. The June hike is fully priced in, and the subsequent decision will be "data dependent". Economic figures released Tuesday showed retail sales in the Eurozone stalled in April, down 2.6% from a year ago, indicating that consumers remain cautious. The German report weakened, with April factor orders declining 0.4% MoM. The monthly ECB survey showed inflation expectations fell in April to 4.1%. On Wednesday, German industrial production data is due.
ON TUESDAY, the US Dollar rose modestly across the board as Wall Street rose marginally. Market participants remain cautious ahead of a crucial week amid a gloomy global outlook and higher interest rates. The Federal Reserve is in the media blackout period before next week's FOMC meeting. Some analysts warn that it will be a close call, with the May Consumer Price Index due next Tuesday being a key determinant.
EUR/USD short-term technical outlook
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The EUR/USD pair bottomed at 1.0663 on Tuesday and rebounded toward 1.0700 but could not retake that level. The bias remains to the downside, although the Euro continues to trade sideways around the 1.0700 area. Risks are tilted to the downside as the price remains under the 20, 55 and 100-day Simple Moving Averages (SMAs). A strong recovery above 1.0800 would provide critical support for the Euro.
On the 4-hour chart, the pair trades below the 20-SMA, adding evidence of the downward bias. The Relative Strength Index (RSI) is flat, below 50, while momentum accelerates to the downside. Above 1.0720, risks seem more balanced. The next resistance stands at 1.0745, followed by 1.0765. On the downside, a decline below 1.0665 would increase the negative pressure, exposing the monthly low at 1.0635.
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