The US dollar failed to sustain gains on Wednesday, strengthening EUR/USD. As financial markets falter, the euro-dollar continues to move.
Inflation in the euro area as a whole was confirmed at 6.9 percent annually in March. European Central Bank (ECB) officials continue to suggest interest rate hikes in the future. Philip Lane, the ECB’s chief economist, said a May hike was likely and the data would determine interest rates.
The S&P Global PMI provides new information on economic activity. Isabelle Schnabel pointed out that while inflation has started to ease, core inflation is holding steady. On Thursday, the European Central Bank will publish the minutes of its latest meeting. The 25 basis point rate hike in May is fully priced.
As for the Federal Reserve, policymakers are also seeing more hikes. James Bullard favors a further half-percent contraction as the labor market looks “very, very strong.” Rafael Bostic would prefer just one more rate hike and a long pause. According to Bej’s book, economic activity has “changed little” in recent weeks. The CME FedWatch tool shows an 83 percent chance of an interest rate hike in May, compared with 70 percent a week earlier. Thursday’s US index includes jobless claims, the Philly Fed and home sales.
The EUR/USD pair is waiting for the next catalyst that could push it above 1.1000 or extend the downtrend. If market sentiment favors risk assets, the euro should benefit as well.
For this purpose, in order to ensure the entry into the purchase transaction, we must wait for the failure from the level of 1.098 according to the risks in order to enter the purchase transaction in order to return and correct again to this rate. Buyers will target the level of 1.1044. A drop below the support level of 1.0947 will invalidate the bullish scenario.
EURUSD is trading in a range with a clear ceiling at 1.09776 holding it back for several sessions. While the broad trend is bullish, recent days have seen painful trading. Resistance remains at 1.09776 and then 1.10. Support remains at 1.0947.
Both the Federal Reserve and the European Central Bank will raise interest rates in two weeks. But several details remain unknown. Will the European Central Bank increase by 25 or half points? Will the Fed’s 25 percent hike be the last rate hike?
The upcoming release of S&P Global preliminary PMIs for April could help set direction. Basically, slightly weaker data from the US will resume the bullish trend of the currency pair after fears of a recession. Investors fear that the Federal Reserve will push the US into a recession that will affect the entire world.
The most important US service sector PMI. At the end of the day, Fed officials’ comments — the last before the bank’s shutdown period — will also have an impact.