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EUR/USD losses traction despite hawkish remarks from ECB officials

  • EUR/USD trading at 1.1027, holding to gains of 0.13% despite the Eurozone Industrial Production plunge.
  • Dutch Central Bank President comments on the need for rate hikes to curb inflation.
  • US Treasury Secretary Yellen states no favorable alternatives to resolve the debt limit issue without Congress’s assistance.

The EUR/USD retreated from daily highs, hitting 1.1053 as the European session ended. The latest week, we have witnessed the US Federal Reserve (Fed) and the European Central Bank (ECB) increasing rates by 25 bps, though divergence would likely favor the latter. Hence, the EUR/USD is trading at 1.1017, with losses of 0.05%.

ECB officials make hawkish remarks as US debt ceiling takes center stage

US equities continued to trade mixed. The EUR/USD pair is clinging to its earlier gains, despite data from the Eurozone (EU), namely Germany, showing that Industrial Production plunged in March to -3.4%, below the -1.3% contraction expected by the consensus. That, alongside the last week, Germany’s Industrial Orders plummeting 10.7% MoM, has raised recessionary fears amongst the EU.

In the meantime, some ECB officials embarked on hawkish remarks, with Dutch Central Bank President Klaas Knot saying that rate hikes are starting to have an effect, but more are needed to curb inflation. Of late, the ECB’s Chief Economist, Philip Lane, commented that inflation will come down, but momentum is still high.

On the US front,  the debt ceiling narrative has taken center stage. According to Janet Yellen, the US Treasury Secretary, there are no favorable alternatives to resolve the debt limit issue in Washington without assistance from the US Congress. In the meantime, US President Joe Biden is expected to meet lawmakers on May 9 to advance in negotiations regarding raising the ceiling.

The US economic docket revealed that Wholesale Inventories were unchanged in March, below estimates of 0.1% MoM, the US Department of Commerce said. Annually based, inventories jumped 9.1% in March, despite the first quarter decline, as more robust US consumer spending contributed to the inventory rundown.

EUR/USD Technical Analysis

EUR/USD Daily chart

The daily chart’s EUR/USD price action suggests buyers remain in the driver’s seat. Of note is that while the EUR/USD pair is reaching higher highs, the Relative Strength Index (RSI) indicator is not, as it has recorded a successive series of lower peaks. Therefore, a negative divergence between price action and the oscillator is emerging, which could pave the way for further losses. However, the EUR/USD must fall below 1.1000 first, so it can challenge the May 2 daily low of 1.0942. before dropping toward the 1.0900 figure. A breach of the latter will expose the 50-day EMA At 1.0883. Conversely, if EUR/USD buyers reclaim 1.1100, that would keep the EUR/USD uptrend intact.

EUR/USD

Overview
Today last price1.1018
Today Daily Change-0.0002
Today Daily Change %-0.02
Today daily open1.102
 
Trends
Daily SMA201.0989
Daily SMA501.0839
Daily SMA1001.0782
Daily SMA2001.0434
 
Levels
Previous Daily High1.1048
Previous Daily Low1.0967
Previous Weekly High1.1092
Previous Weekly Low1.0942
Previous Monthly High1.1095
Previous Monthly Low1.0788
Daily Fibonacci 38.2%1.1017
Daily Fibonacci 61.8%1.0998
Daily Pivot Point S11.0975
Daily Pivot Point S21.0931
Daily Pivot Point S31.0894
Daily Pivot Point R11.1056
Daily Pivot Point R21.1093
Daily Pivot Point R31.1137

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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