- The data showed better than expected PMI values for Germany.
- ECB President Lagarde is very confident that inflation is under control.
- Minutes from the Fed meeting revealed some hawkish sentiment among policymakers.
The EUR/USD forecast shows a slight bullish bias as the Euro recovers on positive Eurozone PMI data. However, the overall bearish trend continues due to dollar strength following the FOMC meeting minutes.
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Eurozone data on Thursday showed better-than-expected PMI values for Germany, which slightly strengthened the euro. The manufacturing PMI rose from 42.5 to 45.4. Meanwhile, the services PMI rose from 53.2 to 53.9. These figures show that business activity in the bloc is improving despite high interest rates. Therefore, there is less pressure on the ECB to start cutting rates.
Nonetheless, ECB policymakers are increasingly confident that they have tamed inflation. The latest inflation report showed a drop from 2.6% to 2.4%. Moreover, ECB President Christine Lagarde said on Tuesday that she is very confident that inflation is under control. Consequently, markets are more confident that the central bank will cut rates in June.
Meanwhile, Fed meeting minutes released on Wednesday revealed some hawkish sentiment among policymakers, boosting the dollar. Inflation in the US has remained stubborn since the beginning of the year. Consequently, most policymakers called on the Fed to keep rates high. However, some have gone so far as to suggest raising interest rates to tame inflation.
However, since the meeting was held before the latest report on subdued inflation, the chances of a rate hike remain low. Meanwhile, policymakers are maintaining a cautious tone as they wait for more evidence that inflation will continue to ease.
EUR/USD key events today
- US unemployment claims
- US manufacturing PMI
- US flash services PMI
EUR/USD technical forecast: Bullish channel giving way to bears
On the technical side, the EUR/USD price has broken out of its bullish channel to the downside, indicating a bearish reversal. The bullish trend reached the 1.0900 level, where the price reversed. The bears have now confirmed the reversal by breaking below the 30-SMA and the channel support line.
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Currently, the price is pulling back to retest the 30-SMA and the channel line before falling or moving back inside the channel. If the price goes lower, it is likely to break below the 1.0800 level to retest the support level at 1.0725. Otherwise, it will retest the 1.0900 level.
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