- The EUR/USD price quickly gave up its gains yesterday, which reached the resistance level of 1.0735.
- The pair rushed to this level after confirmed economic and inflation figures from the euro zone showed that there was no need for the European Central Bank to reduce interest rates.
Recently, It retreated on its broader downward path to the support level of 1.0652. Markets had expected an interest rate cut by the European Central Bank in June, but the odds of a cut in July decreased after euro zone inflation remained steady at 2.4% year-on-year in April. Core inflation was 2.7%, higher than the 2.6% the market was looking for.
For its part, the statistics office Eurostat said that the euro area's gross domestic product grew by 0.3% on a quarterly basis in the first quarter, recovering from -0.1% in the fourth quarter and exceeding expectations for a growth of 0.1%. These numbers helped the euro/dollar price rise again above the 1.07 level, and the rise appears to be on its way to testing the 1.0750 area. But what matters for the euro going forward is how many subsequent interests rate cuts the ECB will implement after the start of June.
These figures indicate that the scope of rapid successive devaluations has diminished, ultimately supporting euro exchange rates. According to analysts, “Today’s inflation data is a warning that the European Central Bank is likely to be cautious about interest rate cuts and may take time to normalize interest rates.” “With the economy showing signs of recovery and unemployment reaching record levels, the ECB can do just that.”
In general, according to the platforms of Forex currency trading companies... EUR/USD gains are not yet convincing enough to indicate a shift in trend and the Euro will likely be viewed as a sell-off on any strength. Commenting on the performance, XM.com analysts said: “The euro’s rebound on the back of this report faced some resistance at $1.0725, and it does not change the general picture of the single European currency: it is still in a narrow range between $1.0600 and $1.0750.” This trading range is the lowest level since October/November 2023.”
Now, the focus on the euro against the US dollar turns to the United States, where the Federal Reserve's decision will be issued on Wednesday and the US jobs report will be released on Friday. A “hawkish” Fed vote, and another better-than-consensus non-farm payrolls report are likely to stop the euro-dollar recovery in its tracks as the euro returns to the best-performing currency in 2024.
EUR/USD Technical analysis and forecast:
Based on the performance on the daily chart above, the upward rebound for the EUR/USD exchange rate failed as expected. Meanwhile, the factors supporting the strength of the US dollar persist, as its appeal as a haven continues amidst widening global geopolitical tensions. Additionally, there is a clear contrast between the policies of the US Federal Reserve, which excludes the possibility of interest rate cuts in the near term, and the European Central Bank, which is more inclined towards easing.
Returning to the nearest support level at 1.0620, a break below it would reinforce the next stronger downward movement towards the support level at 1.0500. Conversely, during the same period, breaking through the resistance levels at 1.0775 and 1.0830 will be significant for bullish control.
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