• Cautiousness arises ahead of the European Central Bank and the Federal Reserve meetings.
  • Growth-related data hints at an economic downturn ahead of critical GDP figures.
  • EUR/USD bullish case on pause, 1.1000 stands in the way.

The EUR/USD pair lost momentum and ended its winning streak, ending the week with modest losses at around 1.0950. The pair fell the most on Monday as the US Dollar extended its fear-inspired gains from the previous Friday. Concerns arose amid tepid United States macroeconomic data and hawkish Federal Reserve (Fed) officials’ comments, which brought a potential recession back to the table. Meanwhile, the Euro was unable to extend gains on self-strength, leaving EUR/USD consolidating within familiar levels throughout the week.

The absence of first-tier data exacerbated range trading as only on Friday, the macroeconomic calendar delivered relevant figures. S&P Global published the final estimates of the April Purchasing Manager Indexes (PMIs) for the Eurozone  (EU) and the United States (US).

The EU Composite PMI jumped to 54.4 as the services index was upwardly revised from 54.5 to 56.6. The manufacturing sector remained in contraction territory, as the index printed 45.5, well below the previous estimate of 47.3. Still, the EU recorded the strongest economic growth in eleven months, with the upswing boosted by picking up demand, the strongest job creation in a year, and easing inflation, according to the official report. As for the US report, the Manufacturing PMI improved to 50.4  from 49.2, while the Services PMI printed at 53.7, beating expectations of 51.5.

Gearing up for central banks’ decisions

Additionally, speculative interest turned cautious ahead of the US Federal Reserve (Fed) and the European Central Bank (ECB) monetary policy meetings in two weeks.  Policymakers these days fell short of providing fresh clues on what’s next in monetary policy. On the one hand, ECB officials maintained the hawkish bias, although hesitating between a 25 or 50 basis points (bps) rate hike in May.  The central bank published the Accounts of its latest meeting on Thursday, and the document showed some members would have preferred that the key interest rates not be raised until financial market worries had abated. However, a large majority agreed to hike rates by 50 bps. The document also showed that policymakers believed that monetary policy “still had some way to go to bring inflation down.”

On the other hand, the Fed's usual hawks claimed more action, but the market does not change its view for a 25 bps rate hike coming up. According to the CME FedWatch tool, odds for such an increase stand at 82%.

Economic growth in the eye of the storm

Meanwhile, the latest released macroeconomic figures confirmed the fears triggered last week by softer-than-anticipated data. Economic Sentiment improved by less than anticipated in April, according to the ZEW survey. On a positive note, the Producer Price Price Index (PPI)  in the country rose at a slower-than-anticipated pace in March, up by 7.5% YoY. At the same time, the EU confirmed the March Harmonized Index of Consumer Prices (HICP) rose at an annualized pace of 6.9%.

Across the pond, housing-related data triggered most alarms. The US published March Housing Starts, Building Permits and Existing Home Sales, all of which declined sharply in the month. Additionally, the Philadelphia Fed Manufacturing Survey contracted to -31.2 in April, much worse than anticipated, while Initial Jobless Claims rose by 245K in the week ended April 14.

Economic growth will stay in the eye of the storm next week, as the US and Germany will release the first estimates of their respective Q1 Gross Domestic Product (GDP).  The US will also publish March Durable Goods Orders, while Germany will unveil the preliminary estimates of the April HICP. Finally, the US will release the March Personal Consumption Expenditures Price Index (PCE), the Federal Reserve’s favorite inflation measure.

EUR/USD technical outlook

The EUR/USD pair has lost momentum, but chances of a U-turn are still quite limited. This past week’s behavior seems consolidative in the middle of a bullish trend as investors gear up to break the 1.1000 psychological threshold. Furthermore, the pair ends the week trading at the upper end of its latest range, suggesting buyers are unwilling to give up.

Technical readings in the weekly chart reflect the aforementioned described situation. EUR/USD is holding just above a bearish 100 Simple Moving Average (SMA), while the 20 SMA maintains its bullish slope below it. The latter currently converges with the 61.8% Fibonacci retracement of the 2022 yearly decline at 1.0745, reinforcing the strong static support level. At the same time, technical indicators hold within positive levels, although turning lower. The Momentum indicator is dangerously close to its 100 level, but the Relative Strength Index (RSI) indicator currently stands at 65, barely retreating from overbought readings.

The technical picture is pretty similar in the daily chart. Technical indicators ease within positive levels, reflecting lessening buying interest, although falling short of suggesting sellers have taken control. Meanwhile, EUR/USD keeps developing above bullish moving averages, with the 20 SMA providing near-term support at around 1.0920 and advancing above the longer ones.

A clear break above 1.1000 will favor a bullish continuation, initially towards 1.1060.  Once above the latter, the rally should continue towards the 1.1120 price zone en route to the 1.1200 figure. Support remains in the 1.0880/910 area, with room for a test of 1.0745 if the region gives up.

EUR/USD Sentiment poll

The FXStreet Forecast Poll suggest EUR/USD will extend its consolidative phase next week. The pair is seen at around 1.1000,  with an equal number or bullish and bearish bets. Bears dominate the monthly perspective, as 59% of the polled experts believe the pair will trade at lower levels. On average, is seen at 1.0893. Still, the decline seems corrective and in the quarterly view, bulls re-take control, represented by 52%  of experts and with an average target of 1.1040.

 The Overview chart shows that the near-term moving average turned modestly lower, although the longer ones extended their advances into fresh multi-month highs. More relevantly, speculative interest continued to lift the potential base of the future range. In the monthly view, the pair is not seen below 1.0600, while for the three-month perspective, the base stands now at 1.0500. 

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


Recommended Content

Editors’ Picks

AUD/USD risks a deeper drop in the short term

AUD/USD risks a deeper drop in the short term

AUD/USD rapidly left behind Wednesday’s decent advance and resumed its downward trend on the back of the intense buying pressure in the greenback, while mixed results from the domestic labour market report failed to lend support to AUD.

AUD/USD News

EUR/USD leaves the door open to a decline to 1.0600

EUR/USD leaves the door open to a decline to 1.0600

A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.

EUR/USD News

Gold is closely monitoring geopolitics

Gold is closely monitoring geopolitics

Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.

Gold News

Bitcoin price shows strength as IMF attests to spread and intensity of BTC transactions ahead of halving

Bitcoin price shows strength as IMF attests to spread and intensity of BTC transactions ahead of halving

Bitcoin (BTC) price is borderline strong and weak with the brunt of the weakness being felt by altcoins. Regarding strength, it continues to close above the $60,000 threshold for seven weeks in a row.

Read more

Is the Biden administration trying to destroy the Dollar?

Is the Biden administration trying to destroy the Dollar?

Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.

Read more

Majors

Cryptocurrencies

Signatures