- EUR/USD has continued to push higher in the early European session.
- The next bullish target for the pair is located at 1.0600.
- Hawkish ECB commentary and improving market mood help the euro find demand.
EUR/USD has preserved its bullish momentum early Tuesday and climbed above 1.0550. The positive shift witnessed in risk sentiment and the latest comments from European Central Bank (ECB) officials help the shared currency outperform its rivals and the pair eyes 1.0600 as its next target.
While testifying before the European Parliament on Monday, ECB President Christine Lagarde noted a recession in the eurozone was not their baseline scenario and confirmed that they intend to raise key rates by 25 basis points (bps) in July. "We expect to raise the key ECB interest rates again in September," Lagarde further acknowledged.
Early Tuesday, ECB Governing Council member Olli Rehn said that it was very likely that September rate hike would be bigger than 25 bps.
In the meantime, US stock index futures are up nearly 2% following the long weekend in the US, suggesting that risk flows dominate the financial markets on Tuesday. Later in the session, Existing Home Sales data from the US will be looked upon for fresh impetus. The market consensus points to a 0.2% decrease in May. In case the report reveals a bigger than expected contraction, it could have a negative impact on risk mood and help the dollar hold its ground. On the other hand, the greenback should stay on the back foot if Wall Street's main indexes continue to rise decisively after the opening bell.
Market participants will also pay close attention to Cleveland Fed President Loretta Mester and Richmond Fed President Thomas Barkin's speeches in the American session.
EUR/USD Technical Analysis
The pair was last seen trading within a touching distance of the 200-period SMA on the four-hour chart at 1.0585. Right above that level, 1.0600 (psychological level, Fibonacci 61.8% retracement of the latest downtrend, 100-period SMA) forms key resistance. In case this level fails, additional gains toward 1.0660 (static level, former support) could be witnessed.
On the other hand, 1.0560 (Fibonacci 50% retracement) now aligns as initial support before 1.0520 (Fibonacci 38.2% retracement) and 1.0500 (psychological level, 50-period SMA).
Meanwhile, the Relative Strength Index (RSI) indicator on the four-hour chart continues to edge higher while staying below 70, suggesting that the pair could continue to push higher before turning technically overbought.
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