The EUR/USD pair clocked a high of 1.1027 on Tuesday, before falling back to 1.09 levels on an upbeat US data. Earlier today, the pair rose from 1.0940-1.0950 levels to a high of 1.10 after the flash PMI reports showed private sector activity at multi month highs in Germany and near four-year highs in the Eurozone.
The rise to 1.10-1.1027 indicates the upbeat Eurozone data has been priced-in by the markets. Meanwhile, the rebound in the US inflation has brought back the possibility of a June rate hike in the US. Though we have not seen a significant strength in the Treasury yields post CPI data, the US dollar has still managed to recover part of its lost ground against major currencies.
Given the upbeat inflation, manufacturing PMI, and new home sales data in the US today, the market is likely to bid up the US dollar ahead of the Wednesday’s Durable goods report. Furthermore, we only have German IFO indices due for release tomorrow. A strong IFO reading could push the pair to 1.0950-1.0970 levels. However, given the markets have priced-in the upbeat PMI reports, a negative IFO reading could very well push the pair down to lower 1.08s.
The daily chart shows the pair has failed for the second time to sustain gains above 1.1 levels. Moreover, the daily candle has dipped into the red after clocking a high of 1.1027, which indicates further losses ahead. The daily RSI and the hourly RSI is bearish as well.
Any bounce from the current level of 1.0924 could be restricted around 1.0950-1.0970 levels. Moreover, a fresh demand for Euros is unlikely to be seen so long as it fails to confirm a close above 1.10 on the 4-hour chart. Given the bearish daily and hourly RSI and the overbought 4-hour RSI, the pair could move to its 5-DMA located at 1.0830 before a fresh demand for the Euros kicks-in.
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