Euro Lifted By Inflation Data But 1.1000 Remains Just Out Of Reach

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. 

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