The EUR/USD falters to gain momentum below 1.0800, however the pair exhibited resilience as it closed above the 20-day Simple Moving Average (SMA) for the first time in a month. This bullish signal sparked optimism among traders, with the SMA currently steadying around 1.0762. Sustaining the Euro above this level may potentially pave the way for further gains in the pair. The next significant resistance level lies at the psychological barrier of 1.0800, coinciding with the presence of the 100-day SMA.
EUR/USD Falters, technical analysis, employment data, and market sentiment shape its trajectory.
Zooming in on the 4-hour chart, the bullish momentum of the pair becomes even more apparent. The price remains comfortably above key moving averages, and the critical level of 1.0760 acts as robust support. However, caution is warranted as technical indicators signal overbought conditions, with the Relative Strength Index (RSI) hovering around 70. This suggests the possibility of a consolidation phase before a potential upward move. Nonetheless, the short-term bias has clearly shifted to the upside. If the pair experiences a decline below the support level of 1.0720, it could challenge the bullish bias and expose subsequent support levels at 1.0700 and 1.0680.
Thursday witnessed a notable surge in the EUR/USD pair, marking its most impressive performance in weeks. The primary catalyst for this upward momentum was the weakening of the US Dollar. The Greenback faced broad-based selling pressure, triggered by lackluster employment data from the United States, just ahead of the highly anticipated Federal Open Market Committee (FOMC) meeting. The current outlook suggests the potential for further gains in the near term, as the Euro continues to capitalize on the Dollar’s weakness.
Despite downward revisions in Euro area Q1 GDP, the Euro remained resilient, displaying its strength against economic headwinds. The growth figures were revised from 0.1% QoQ to -0.1% QoQ, reflecting a mixed performance across countries. Notably, Italy and Spain showcased a robust expansion of 0.5%, France recorded a modest growth of 0.2%, while Germany faced a contraction of 0.3%. Although these revised numbers may have raised concerns, they have not significantly altered expectations for the upcoming European Central Bank meeting. Market participants have already priced in a 25 basis points rate hike, and attention now turns to the updated macroeconomic forecasts, which are likely to hold greater importance than the actual decision itself.
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The rally in the EUR/USD pair on Thursday can be attributed to a combination of factors. In addition to the weaker US Dollar, risk appetite among investors played a pivotal role in driving the pair’s gains. Furthermore, technical factors contributed to the positive sentiment surrounding the Euro. Looking ahead, traders and market participants will closely monitor the release of key economic data, such as the May Consumer Price Index, scheduled just a day before the FOMC decision. This report holds significant influence over market sentiment and could potentially impact the future direction of the EUR/USD pair.
The negative employment data from the United States, specifically the unexpected rise in Initial Jobless Claims to the highest level since October 2021, has further dampened hawkish expectations regarding the Federal Reserve’s monetary policy. As a result, market sentiment has shifted, and investors have become increasingly cautious. Nevertheless, the exact implications of this data will become clearer following the release of the May Consumer Price Index. This report will provide crucial insights into inflationary pressures and could potentially shape the stance of the Federal Reserve in the upcoming FOMC meeting.
As Wall Street cheered the negative employment numbers, risk appetite intensified, exerting additional pressure on the US Dollar. Moving forward, all eyes will be on a speech from ECB’s Guindos, which is expected to provide further insights into the Eurozone’s economic outlook. The Asian session approaches, and the US Dollar continues to display weakness, potentially extending its losses after a brief consolidation period. However, it is worth noting that any deterioration in market sentiment could limit the upside potential of the EUR/USD pair and pave the way for a sharp correction.
Conclusion
In conclusion, the EUR/USD pair remains in a position below the significant resistance level of 1.0800. Technical analysis signals a bullish outlook, supported by the weakening of the US Dollar. Employment data, particularly the unexpected rise in Initial Jobless Claims, has significantly influenced market sentiment. Traders and investors eagerly await the release of the May Consumer Price Index, as it holds the key to gauging future inflationary pressures and the Federal Reserve’s policy stance. As the US Dollar remains on the back foot, the direction of the EUR/USD pair will likely continue to be influenced by risk appetite, economic indicators, and central bank actions.
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