- EUR/USD has been moving sideways in a tight channel this week.
- A soft US CPI print could help the pair push higher.
- Near-term key resistance for the pair is located at 1.0600.
EUR/USD has extended its sideways grind above 1.0500 into a fourth straight trading day on Wednesday with investors staying on the sidelines ahead of the US April inflation data.
Markets expect the Consumer Price Index (CPI) in the US to edge lower to 8.1% on a yearly basis from 8.5% in March. A soft inflation print could cause the greenback to lose its appeal and help EUR/USD break higher. On the flip side, a stronger-than-forecast CPI reading should attract dollar bulls and force the pair to lose its traction.
It's worth noting that factors driving the US inflation higher, such as supply-chain issues and rising energy prices amid the prolonged Russia-Ukraine conflict, remain in place. Hence, it's too early to say whether or not the pair could stage a steady rebound on a single data point.
US CPI Preview: Hard core inflation to propel dollar to new highs, and two other scenarios.
The positive shift witnessed in risk mood is helping the shared currency stay resilient against the dollar early Wednesday. The Euro Stoxx 600 Index is up 0.5% and US stock index futures post modest daily gains. In case Wall Street's main indexes gain traction after the US data, the dollar is likely to have a hard time finding demand.
In the meantime, European Central Bank (ECB) President Christine Lagarde repeated on Wednesday that she was expecting the Asset Purchase Programme (APP) to be concluded early in the third quarter. Although this remark suggests that the first ECB rate hike is likely to come in July, the shared currency failed to capitalize on it due to the fact that ECB policymakers have been voicing their support for such a move since mid-April.
On the other hand, the benchmark 10-year US Treasury bond yield is already down more than 6% this week, keeping the dollar's upside capped. Cleveland Fed President Loretta Mester said on Tuesday that the Fed would need to assess the situation after hiking the policy rate by 50 basis points in June and July.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart rose above 50 early Wednesday, pointing to a bullish tilt in the near term. Additionally, EUR/USD continues to trade above the 20 and 50-period SMAs on the same chart, confirming the view that sellers remain on the sidelines.
On the upside, 1.0600 (psychological level, Fibonacci 23.6% retracement of the latest downtrend) aligns as key resistance. With a four-hour close above that level, further recovery gains toward 1.0630 (100-period SMA) and 1.0660 (Fibonacci 38.2% retracement) could be witnessed.
Supports are located at 1.0540 (20-period SMA, 50-period SMA), 1.0500 (psychological level and 1.0470 (multi-year low set on April 26).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD flirts with daily tops near 1.0730
The continuation of the selling pressure in the Greenback now lends further oxygen to the risk complex, encouraging EUR/USD to revisit the area of daily highs near 1.0730.
USD/JPY looks stable around 156.50 as suspicious intervention lingers
USD/JPY remains well on the defensive in the mid-156.00s albeit off daily lows, as market participants continue to digest the still-unconfirmed FX intervention by the Japanese MoF earlier in the Asian session.
Gold holds steady above $2,330 to start the week
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
Week Ahead: Bitcoin could surprise investors this week Premium
Two main macroeconomic events this week could attempt to sway the crypto markets. Bitcoin (BTC), which showed strength last week, has slipped into a short-term consolidation.
Five Fundamentals for the week: Fed fears, Nonfarm Payrolls, Middle East promise an explosive week Premium
Higher inflation is set to push Fed Chair Powell and his colleagues to a hawkish decision. Nonfarm Payrolls are set to rock markets, but the ISM Services PMI released immediately afterward could steal the show.