- The EUR/USD reached five-day highs and then pulled back to the 1.1700 area.
- The pair continues to move without a clear direction, awaiting next week's US CPI and the Fed and ECB meetings.
- The US dollar recovered momentum during Wednesday's American session amid higher US yields.
The EUR/USD approached weekly lows near 1.0645 and then jumped to 1.0739, reaching the highest level since Friday, only to pull back later to the 1.0700 area. The pair continues to move sideways, awaiting new catalysts and next week's events.
The European Central Bank (ECB) is set to meet next week, and a rate hike is priced in. ECB's Schnabel said that how much more rates are needed will be data-dependent, while ECB's Knot said that he is not convinced that the current level of tightening is sufficient. Next week's meeting includes new forecasts and will be critical for July expectations.
Regarding economic data, on Wednesday, Germany reported an increase in industrial production of 0.3% MoM in April, below the expected 0.6%. A new estimate of Q1 Euro area GDP will be released on Thursday, along with employment change data.
The US dollar gained momentum Wednesday after the Bank of Canada rate hike, supported by surging US bond yields. The 10-year yield rose 3.50% to 3.79%, the highest since May 29, and the 2-year to 4.60%. Next week's consensus still points to the Federal Reserve keeping the Fed Funds rate at the 5.00%-5.25% range. However, the surprise move by the BoC and the Reserve Bank of Australia, plus US employment data, could be a warning about potential action. The Consumer Price Index next Tuesday will be crucial. On Thursday, the weekly jobless claims report is due.
EUR/USD short-term technical outlook
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The EUR/USD pair peaked at 1.0738 on Wednesday and then pulled back. The outlook remains uncertain as the price cannot move away from the 1.0700 area. The daily chart's price remains below the 20, 55, and 100-day Simple Moving Averages (SMAs), indicating a downside bias. However, a close above the critical resistance level of 1.0780 could shift the balance in favor of the Euro, potentially leading to further gains.
On the 4-hour chart, the pair offers no clear signs. The Relative Strength Index (RSI) is flat near 50. On the upside, the key short-term resistance is 1.0725: a consolidation above would strengthen the Euro. On the flip side, the support is at 1.0675. A break lower could prompt a bearish acceleration, initially targeting the weekly low at 1.0660 and then 1.0650. A move below the latter would increase bearish pressure, exposing the monthly low at 1.0635.
View Live Chart for the EUR/USD
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