- The euro fared well amid signs the US economy is slowing and inflation easing.
- Data showed that U.S. manufacturing output unexpectedly fell in April.
- The ECB’s Schnabel stressed caution after June, as the outlook remains uncertain.
The EUR/USD outlook is easing slightly as the Euro experiences a pullback after recent gains. Despite this decline, the currency is on track for its biggest weekly gain against the dollar in more than two months. In a week, it increased by 0.8%.
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The euro fared well amid signs the US economy is slowing and inflation easing. Inflation data in April fell from the previous month, giving investors and policymakers hope that the downward trend from Q4 of last year is still present.
Moreover, the data revealed a continued slowdown in the US economy, starting with the labor market. Meanwhile, retail sales figures were unchanged, well below forecasts. Similarly, data showed that manufacturing output unexpectedly fell in April. This decline in economic activity indicates a drop in demand due to high interest rates. Because of this, there is more pressure on the Federal Reserve to start cutting interest rates.
Meanwhile, the situation in the Eurozone is the opposite. Although policymakers are poised to implement the first cut in June, there is less pressure to do so as the economy improves. It is notable that the German economy grew more than expected in the last quarter. At the same time, investor morale in the Eurozone is at a two-year high.
Elsewhere, the ECB’s Isabelle Schnabel said the central bank would cut rates in June. However, she then expressed caution as the outlook remains uncertain.
EUR/USD key events today
After a week full of high-impact events, the pair could end on a low note, with no major events coming out of the US or the Eurozone.
EUR/USD technical outlook: Pullback after testing channel resistance
On the technical side, the EUR/USD price is pulling back from the bullish channel resistance. However, the bullish bias remains intact as the price is still inside the bullish channel and above the 30-SMA. Furthermore, although the RSI has pulled out of the overbought region, it is trading above 50, supporting the bullish momentum.
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Therefore, the pullback could stop at three major support levels. Bulls can appear at the 30-SMA support line, the 1.0800 support level, or the channel support line. A bullish reversal at any of these levels would allow the price to target the 1.0900 level.
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