- Before announcing important American economic data, EUR/USD has dipped to near the 1.08 support level again.
- The market extended losses to 1.0788, giving up recent gains to the 1.0889 resistance level seen at the start of this week's trading as the US dollar gained strong momentum from expectations of future tightening by the US Federal Reserve.
Overall, markets are still assessing the ECB's monetary policy expectations. The EU's harmonized inflation gauge for Germany slightly exceeded expectations for May, rebounding to 2.8%.
While the upside surprise was not sharp enough to jeopardize the widely expected ECB rate cut next week, lingering concerns that the pace of inflation deceleration is slowing. The strong growth backdrop highlighted by the May PMI readings have raised some uncertainty about whether the ECB can afford a more dovish policy stance in Q3.
Meanwhile, hawkish signals from Federal Reserve members tempered expectations for a US interest rate cut by the third quarter, putting pressure on the EUR/USD pair.
According to the economic calendar results, EUR/USD is being traded under the influence of the US Redbook index for the week ending May 24, which rose by 6.3% from the previous week's 5.5%. On the other hand, US mortgage applications for the period showed a change of -5.7% compared to a change of 1.9% in the previous week. Furthermore, the US house price index for March missed expectations (monthly) of 0.5% with a change of 0.1%. also, the S&P/Case-Shiller house price indices beat expectations by 7.3% with a change of 7.4%. (annually).
In the EU, the German preliminary CPI for May exceeded the expected change (monthly) of 0.2% with a change of 0.1%. Moreover, the (annual) equivalent for the period matched the expected change of 2.4%. On the other hand, the German preliminary HICP for the month exceeded expectations (y/y) of 2.7% with a change of 2.8%, while the (m/m) equivalent was in line with the estimate of 0.2%. Earlier in the same week, Germany's IFO business climate for May was 90.3 against a reading of 89.3. The IFO current and expectations assessments also fell from 89.9 and 90.5, respectively, to 88.3 and 90.4.
Today, all focus will be on the results of the US economic data, led by the announcement of the GDP growth reading, the number of weekly jobless claims, and US home sales.
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EUR/USD Technical analysis and forecast:
The EUR/USD pair has now rebounded to trade at the 100-hour moving average line. As a result, it appears that the pair has avoided falling into oversold levels on the 14-hour Relative Strength Index. In the near term, based on the hourly chart performance, it seems that the EUR/USD pair is trading within a descending channel formation. However, the 14-hour RSI appears to have rebounded to avoid reaching oversold levels. Therefore, the bulls will target extended rebounds around 1.0861 or higher at 1.0876. On the other hand, the bears will look to extend the current downtrend towards 1.0780 or lower to 1.0755.
In the long term, and according to the performance on the daily chart, it appears that the EUR/USD currency pair is trading within an upward channel. Also, the 14-day RSI appears to support a long-term bullish bias as it approaches overbought levels. Therefore, the bulls will target long-term gains at around 1.0934 or higher at the 1.1028 resistance. On the other hand, the bears will be looking to pounce on pullbacks at around 1.0770 or lower at the 1.0600 support.