- Business activity in the Eurozone grew at a faster pace than in the US in April.
- The euro has lost almost 2.5 percent of its value against the dollar this year.
- Investors await the US PPI report.
The outlook for EUR/USD is bullish as the euro shows remarkable resilience ahead of US wholesale inflation data. Despite the slight pullback, the pair maintained its recent uptrend amid signs that the gap in economic performance between the eurozone and the US is closing.
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Notably, recent data revealed some economic improvements that eased pressure on the ECB to cut rates. Moreover, business activity in the Eurozone grew faster than in the US in April. At the same time, US employment and growth figures missed forecasts. Therefore, as pressure on the ECB eases, there is increasing pressure on the Fed to cut interest rates. This allowed the EUR/USD pair to rise despite the upcoming ECB rate cut.
However, the euro has lost almost 2.5% of its value against the dollar this year. This decline was mainly due to differences in the policy outlook between the ECB and the Fed. Markets expect the European Central Bank to cut rates three times this year. Meanwhile, the Fed could only cut twice. Moreover, this outlook could change with more inflation data from the US. The number of expected Fed cuts could be reduced if inflation beats forecasts.
Furthermore, investors are likely to delay the timing of the first rate cut. Consequently, the euro would fall. On the other hand, easing inflation would solidify bets on a Fed rate cut, allowing the euro to continue its recovery.
EUR/USD key events today
- US Core PPI m/m
- US PPI m/m
- Fed President Powell is speaking
EUR/USD Technical Outlook: Bulls challenge 1.0800 after retesting channel support
On the technical side, the EUR/USD price rose to retest the resistance level at 1.0800. This comes after a big bounce from the 1.0725 support level. Here, the price made a bullish candle, respecting a solid support level consisting of the bullish channel line and the 1.0725 level.
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After retesting the channel support, the price is likely to rise to the channel resistance. However, to do so, the bulls must break above 1.0800. Notably, EUR/USD is above the 30-SMA and the RSI is above 50. Therefore, the bullish bias is strong. If this continues, the price will soon pass 1.0800.
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