As a result of Tuesday’s sluggish dollar recovery, fresh selling pressure has pushed the EUR/USD down to the low 1.1000s.
EUR/USD continues to aim for the peak of 2023
EUR/USD yields to the improved sentiment surrounding the dollar and reverses three consecutive sessions of gains on Tuesday.
Despite the knee-jerk reaction, the pair remains poised to continue its uptrend in the near future. Indeed, this view continues to be supported by stronger rumors that the ECB will raise the policy rate in June and July, which in turn appear to be supported by the unabated hawkish rhetoric from the ECB’s rate-setters.
Tuesday’s lack of data releases in the eurozone will shift focus to the US economic calendar, where the Conference Board’s Consumer Confidence index will be the focal point of discussion, followed by New Home Sales and the FHFA’s House Price Index.
What to search for near EUR
As a result of some evidence of life from the greenback, EUR/USD has retreated from recent highs in response to renewed dollar weakness.
In the meantime, the single currency’s price action should continue to closely track dollar dynamics as well as the nascent Fed-ECB divergence regarding the banks’ intentions regarding potential future interest rate movements.
In the future, hawkish ECB-speak continues to advocate for additional rate increases, despite some loss of momentum in the region’s economic fundamentals.
This week’s key events in the eurozone include Germany GfK Consumer Confidence (Wednesday) – EMU Final Consumer Confidence, Economic Sentiment (Thursday) – Euro Group Meeting, Germany Labor Market Report/Advanced Inflation Rate/Flash Q1 GDP Growth Rate, and EMU Flash Q1 GDP Growth Rate (Friday).
Important matters on the rear burner: Continuation (or not) of the ECB’s cycle of rate hikes. Impact of the Russia-Ukraine Conflict on regional development and inflation prospects. Inflation risks becoming entrenched.
EUR/USD levels to observe
At 1.1027, the pair is down 0.16 percent and the next support level is 1.0909 (weekly low for April 17), followed by 1.0831 (monthly low for April 10) and 1.0788 (monthly low for April 3). On the upside, a break above 1.1075 (high from 14 April 2023) would target 1.1100 (round level) en route to 1.1184 (weekly high from 21 March 2022).