- For three trading sessions in a row, the price of the euro against the US dollar (EUR/USD) is trying to rebound higher, but its gains did not exceed the level of 1.0680.
- The losses of the downward trend reached the support level of 1.0601, its lowest level in five months.
As we mentioned before, selling operations increased considering the strength of the US dollar in the Forex currency market, with momentum from the positive results of US economic data, because of which expectations weakened of the imminent date of reducing US interest rates. On the other hand, the euro price received downward pressure as the European Central Bank became the closest to reducing interest rates.
Economic Calendar Outlook
The EU Harmonized Consumer Price Index for March was in line with expectations (monthly) of 0.8%, unchanged from the previous update. The core HICP for the period also remained steady at 2.9%, in line with estimates. Also, the (monthly) equivalent remained unchanged from the previous period at 1.1%. On Tuesday, US building permits for March exceeded expectations of 1.514 million with a total of 1.458 million. Also, housing starts for the period were below the expected 1.48 million with a total of 1.321 million. On the other hand, industrial production for March was in line with estimates of 0.4%. Moreover, US retail sales for March beat expectations (monthly) of 0.3% with a change of 0.7%. furthermore, Retail sales excluding autos for the period exceeded expectations of 0.4% with a change of 1.1% (monthly).
On the other hand, according to stock trading platforms, US stock indices closed lower on Wednesday, as investors weighed the latest batch of profits and the hawkish tone from Federal Reserve officials. According to trading, the Standard & Poor's 500 index fell by 0.5%, and the Nasdaq index fell sharply by 1.1%, both representing the fourth consecutive session of losses, reaching its lowest levels in February. Meanwhile, the Dow Jones ended down 0.1% as gains in UnitedHealth shares limited the index's losses.
For his part, Fed Chairman Powell indicated that the Fed is in no hurry to cut US interest rates in response to recent signs of rising inflation, a sharp change in tone from previous statements that the hot inflation readings in January and February did not change the downward trend in inflation.
In trading, semiconductor stocks led the losses, with ASML shares down 7% on poor results, while ARM and Nvidia shares fell 12% and 3.8%, respectively. Also, Abbott shares fell 3% as a decline in second-quarter earnings guidance offset strong sales. On the other hand, US Bancorp shares rose 1.7% despite lower net interest income expectations, and United Airlines shares rose 17.4% on strong results.
On the US Treasury market front, the yield on the 10-year Treasury bond fell to 4.63% from its 2024 high of 4.7%, as traders closely watch monetary policy and the possibility of continued high interest rates. Stronger-than-expected US retail sales, inflation, and employment data had prompted investors to trim their expectations for Fed funds rate cuts this year.
Futures contracts show that a slight majority of the market expects the Fed to start cutting rates only in September, while nearly 20% are bracing for no rate cuts at all this year. Furthermore, President Powell reiterated during a panel discussion at the Wilson centre in Washington that the Fed may need more time to feel comfortable cutting rates. At the same time, demand for safe-haven assets eased as there were no further signs of escalation in the Middle East conflict following Iran's retaliatory strike on Israel over the weekend.
EUR/USD Technical analysis and forecast:
The Euro to US Dollar (EUR/USD) exchange rate has now risen, trading above the 100-hour moving average on the hourly chart. As a result, it appears that the EUR/USD currency pair is on the verge of entering overbought levels for the Relative Strength Index on the 14-hour timeframe.
In the short term, based on the performance on the hourly chart, it seems that the EUR/USD pair has recently completed an upward breakout from a sideways channel. Additionally, the Relative Strength Index on the 14-hour timeframe also supports the bullish trend in the short term as it approaches overbought levels. Therefore, bulls will target extended gains around 1.0707 or higher at resistance 1.0740. On the other hand, bears will look to capitalize on pullbacks around 1.0633 or lower at support 1.0603.
On the longer term and based on the performance on the daily chart, it appears that the EUR/USD currency pair is trading within a descending channel. However, the 14-day Relative Strength Index has recently rebounded to avoid falling into oversold levels. Therefore, bulls will look to extend the current rebounds towards 1.0779 or higher at resistance 1.0885. Conversely, bears will target profits in the long term around 1.0567 or lower at support 1.0440.
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