The Euro (EUR) trades above 1.0960 against the US Dollar (USD) during the European session on Wednesday. The pair has gained a lift after Eurozone data showed an upwards revision of core inflation data for March, suggesting the ECB may be more aggressive in raising interest rates at their May meeting. EUR/USD has pulled back over recent sessions after briefly making year-to-date highs of 1.1075 on April 14. The correction comes from a strengthening US Dollar as bets crystalize that the Federal Reserve (Fed) will continue raising interest rates.
From a technical perspective, the pair is broadly in a medium-term uptrend which is biased to extend.
EUR/USD Market Movers
- EUR received a small lift after the Core Harmonized Index of Consumer Prices (HICP) was revised to 1.3% from 1.2% in the final estimate for March. This will increase the probability the ECB will raise rates more aggressively at their May meeting.
- USD gains a boost from St. Louis Fed President James Bullard’s comments that the Fed should continue raising rates due to persistent inflation and overblown recession fears.
- Unexpectedly strong first-quarter earnings from JP Morgan and Bank of America indicate resilience in the crisis-hit US banking sector, further supporting the Greenback.
- Data showing a sharp rise in inflation expectations in Friday’s Michigan Consumer Confidence Survey resuscitate the inflation narrative.
- Recent US employment data shows a strong labor market, further putting pay to recession fears.
- Euro remains supported by expectations that the ECB will continue with interest rate hikes, though their size will be data-dependent.
- European Central Bank’s chief economist Philip Lane has said the health of the region’s banks, as reported in the ECB Bank Lending Survey (BLS), will be a key determinant of whether the ECB hikes aggressively or not.
- Lane is scheduled to deliver a speech at 10:35 GMT on Wednesday – sees April HICP inflation as also key to the outlook on rates.
- From the US, the main data release is the Fed’s Beige Book, out at 18:00 GMT.
EUR/USD Technical Analysis: Uptrend Intact And Likely To Extend
EUR/USD is in a medium-term uptrend since recovering from the September 2022 lows, and the established trend is expected to continue. After a pullback in February 2023, EUR/USD recouped its losses during March and made new year-to-date highs above 1.10 on April 13.
This week, the pair has pulled back down into the mid-1.09s, where it currently trades at the time of writing. Given the strength of the overall uptrend, it is expected to recover and continue extending higher.
A break and daily close above the 1.1075 year-to-date highs of April 14 would provide bulls with fresh confidence to push higher, and the pair could rise to the next target at around 1.1190, where the 200-week Simple Moving Average (SMA) is situated and likely to provide pushback.
On the other hand, a break and close below the lower high at 1.0830 would bring into question the strength and validity of the uptrend and could see losses extend down to a confluence of support at 1.0750.