EUR/USD exhibited a modest uptick on Wednesday, reclaiming ground into the 1.0770s after a recent dip to six-week lows. The rally, although uncertain in its nature, hints at a possible corrective move following the dominant short-term downtrend.
Despite the release of the Harmonized Index of Consumer Prices (HICP) and the Unemployment Rate data, the pair remained relatively unaffected. Eurozone’s headline inflation dipped to 2.4% YoY in March, while core inflation slipped to 2.9%, signaling a cooling in price pressures. Additionally, the Eurozone’s Unemployment Rate rose to 6.5%, potentially increasing the likelihood of an earlier interest-rate cut from the European Central Bank (ECB).
EUR/USD’s recent bearish trajectory stems from shifting interest rate expectations between Europe and the United States. While the Fed is anticipated to maintain higher borrowing costs, the ECB is viewed as possibly bringing forward interest rate cuts. This divergence in outlook has influenced the pair’s performance, with Eurozone’s inflation decelerating at a faster pace compared to the U.S.
Tuesday’s rebound from multi-week lows was possibly technical in nature, supported by oversold readings on intraday charts. Additionally, commentary from Federal Reserve Bank of San Francisco President Mary Daly, hinting at potential rate cuts, may have contributed to the recovery.
Looking ahead, key data releases from the U.S., including ADP Employment Change and ISM Services PMI, are expected to influence market sentiment. Moreover, additional speeches from Federal Reserve officials may provide further insights into monetary policy decisions.
Technically, EUR/USD formed a bullish Piercing Line Japanese candlestick reversal pattern on the daily chart, signaling a temporary continuation of the rebound. However, the pair remains in a short-term downtrend, with the next key resistance seen at 1.0798. Conversely, February’s lows at 1.0694 serve as crucial support levels, with a decisive break potentially triggering further downside momentum towards the 1.0650s.
Amidst ongoing interest rate speculation and economic data releases, EUR/USD continues to navigate a volatile landscape, with market participants closely monitoring developments for directional cues.
