The stability of the exchange rate of the EUR/USD currency pair against the US dollar is still above the psychological resistance 1.1000, which supports the bullish trend of the currency pair. Its gains, which closed around the 1.1016 level, are on an important date this week, as both the European Central Bank and the US Federal Reserve will announce an update to their monetary policy, which still supports more rate hikes.
US Federal Reserve policymakers are about to extend their year-long campaign to raise US interest rates to beat persistent inflation, even as risks to the US economy mount. The FOMC is therefore expected to boost its benchmark lending rate target by another quarter of a percentage point on Wednesday, marking the 10th consecutive increase dating back to March of last year. While officials' efforts have helped reduce price pressures in the US economy, inflation remains well above their target.
Meanwhile, last week's first-quarter economic growth figures indicated the economy is undergoing a downward turn. The monthly US jobs report on Friday will give an idea of how labor demand - a major support for the economy - has stalled. The expected increase in April payrolls by 180,000 is seen as healthy, although it would mark the third consecutive month of slower employment growth. A still-flat job market has been instrumental in broadening economic growth that is increasingly feeling the malaise caused by the Fed's more hawkish policy.
Other data on the schedule includes job openings for March and April surveys of purchasing managers in manufacturing and services.
Other Factors Affecting EUR/USD
The European Central Bank took center stage on Thursday with its interest rate decision on the heels of the Federal Reserve the previous evening. Investors and economists expect a quarter-point rise, easing the pace of tightening as past central bank moves hit the economy with a lag and persistent financial stability concerns prompt caution.
Crucial to the decision will be the latest survey on ECB bank lending, due on Tuesday, and inflation data published the same day. Economists expect consumer price numbers to show mixed signals: a core gauge may accelerate for the first time in half a year, while a core indicator that excludes volatile items such as energy may show a slowdown.
This is the last measure ECB officials monitor - and if the report shows so-called core inflation unexpectedly accelerating, then a larger price move could occur.
Technical analysis of the euro / dollar:
- EUR/USD price formed higher bottoms and found resistance at 1.1070 area, creating an ascending triangle in its short-term timeframe.
- The price may bounce back, as technical indicators suggest.
- The 100 SMA has crossed above the 200 SMA to indicate that the general trend is still up or that the support is more likely to hold than break.
- In this case, EUR/USD could make its way to resistance again.
Also, the stochastic is moving higher after indicating oversold levels for some time. The oscillator has plenty of room to rise before it reverses exhaustion among the buyers. Likewise, the RSI is heading higher, so EUR/USD may follow suit as bullish momentum returns. The bulls' closest targets are currently 1.1075, 1.1120, and 1.1200, respectively. On the other hand, according to the performance on the daily chart, breaking the support level 1.0920 is important for the bears to control the trend again.
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