- EUR/USD has gone into a consolidation phase following a four-day slide.
- The pair faces stiff resistance at around 1.0750.
- US PCE inflation data for April could trigger the next big action in EUR/USD.
EUR/USD edged higher on Friday following a four-day slide that saw the pair touch its weakest level in over two months near 1.0700. Still, the near-term technical outlooks is yet to reveal a bullish tilt in the short term and the next directional movement could be influenced by the Personal Consumption Expenditures (PCE) Price Index data from the US later in the day.
The upbeat macroeconomic data releases from the US revived expectations for one more Federal Reserve (Fed) interest-rate increase in June and provided a boost to the US Dollar (USD) on Thursday. The US Bureau of Economic Analysis revised the first-quarter annualized Gross Domestic Product growth to 1.3% from 1.1% initially estimated, while the weekly Initial Jobless Claims came in at 229,000 compared to market expectations of 245,000.
The annual Core PCE Price Index, the Fed's preferred gauge of inflation, is forecast to rise 4.6% in April, matching March's reading. On a monthly basis, core PCE inflation is expected to hold steady at 0.3%. In case the monthly reading comes in at or above 0.5%, markets could continue to lean toward one more Fed rate hike in June and help the US Dollar (USD) gather strength ahead of the weekend. On the other hand, a softer-than-expected number should limit the USD's gains and allow EUR/USD to extend its rebound.
According to the CME Group FedWatch Tool, the probability of the Fed leaving its policy rate unchanged in June fell below 60% from nearly 80% earlier in the week. The market positioning suggests that EUR/USD faces a two-way risk depending on PCE inflation data.
EUR/USD Technical Analysis
EUR/USD was last seen trading near the upper-limit of the descending regression channel near 1.0750. The Fibonacci 61.8% retracement level of the latest uptrend reinforces that figure as resistance. In case the pair manages to clear that hurdle and starts using it as support, it could extend its rebound toward 1.0800 (Fibonacci 50% retracement, 50-period Simple Moving Average) and 1.0830 (static level).
On the downside, interim support seems to have formed at 1.0720 (static level), ahead of 1.0700 (mid-point of the descending channel) and 1.0670 (lower-limit of the descending channel).
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