EUR/USD Forecast: ECB’s hawks boost the shared currency

EUR/USD Current Price: 1.0880

• Easing government bond yields put pressure on the American currency.
• European Central Bank policymakers are paving the way for a rate hike in July.
• EUR/USD is technically bullish, although still unable to break through a critical resistance level.

The EUR/USD pair surged toward the 1.0900 price zone as investors welcomed European Central Bank policymakers’ words. The vice-president of the central bank, Luis de Guindos, said that he believes inflation is close to a peak but added that a rate hike is possible in the second half of the year, depending on macroeconomic data. Additionally, Governor Pierre Wunsch said that he is willing to consider raising the deposit rate in July.

Softer US government bond yields are taking their toll on the greenback, down from their weekly peaks. However, concerns related to inflation and recession and the ongoing war between Ukraine and Russia remain unchanged. With that in mind, the American currency could change course anytime. Anyway, it does not seem to be the case right now, as the positive tone of global indexes is adding to the greenback’s broad weakness.

On the data front, the EU published the final readings of March inflation figures. The annual Harmonized Indices of Consumer Prices was confirmed at 7.4% YoY, slightly below the preliminary estimate of 7.5%. Across the pond, US Initial Jobless Claims in the week ended April 15 were up to 184K, worse than the 180K expected. The country also published the April Philadelphia Fed Manufacturing Survey, which declined from 27.4 to 17.6, missing the market’s expectations. Several central banks’ leaders will be speaking at the IMF event, with Jerome Powell and Christine Lagarde among the most notable speakers today.

EUR/USD short-term technical outlook

The EUR/USD pair is in an upward corrective phase that may continue in the upcoming sessions. It peaked at 1.0935, briefly surpassing the 38.2% retracement of its latest daily slide at 1.0920, but now trading below it. The daily chart shows that it is up for a third consecutive day but that sellers rejected the advance at around the bearish 20-SMA. Meanwhile, the longer moving averages accelerated their declines above the shorter one, as technical indicators keep advancing within negative levels.

The 4-hour chart shows that the pair is retreating from a mildly bearish 100-SMA, while technical indicators turned lower after nearing overbought readings but hold within positive levels. At the same time, the 20-SMA heads higher below the current level, limiting the bearish potential of the pair. Renewed buying interest beyond the 1.0920 level should lead to a continuation of the corrective advance, while further slides below 1.0860, the immediate Fibonacci support level, should put the pair back on the bearish track.

Support levels: 1.0860 1.0825 1.0790

Resistance levels: 1.0920 1.0970 1.1015

View Live Chart for the EUR/USD