The EUR/USD exchange rate entered the new month stalling around the 1.10 resistance. It is likely to struggle to maintain itself above this level unless the central bank’s policy decisions this week provide the single European currency with a clearer interest rate advantage over the dollar. In the beginning of trading, the EUR/USD price jumped to the 1.1035 resistance level, before settling around 1.0982 at the time of writing the analysis.
The European single currency – the euro – was among the best performers in the basket of major currencies during the week through Monday even after weak economic figures from some major European economies left the euro behind several continental currencies ahead of the weekend. Commenting on the performance, Silvia Ardani, chief European economist at Barclays, wrote in a Friday paper: “The first-quarter GDP print showed that PMI surveys were completely misleading in predicting actual economic activity, while national and European Commission surveys were indicative.
She added, “Confidence in the industry has been on a downward trajectory over the past year, while it has slowly improved in services but has remained at levels consistent with only modest growth. This supports our expectations for another quarter of moderate growth in the second quarter (+0.1% qoq. Followed by stagnation in the second half).
Eurostat figures on Friday suggested that European economic growth generally stalled during the first quarter, somewhat denting the optimism about the outlook encouraged by private sector surveys released over the course of March and April. German GDP was unchanged in the first quarter while French economic output rose in line with economic expectations after weak consumer spending during the latter part of the period partially offsetting better data elsewhere in the continent.
This week, continental inflation figures and their implications for the European Central Bank’s interest rate expectations will pave the way for the single currency ahead of Wednesday’s US interest rate decision and Thursday’s European Central Bank policy decision, ECB chief economist Philippe Lane told Le Monde newspaper in an interview published on Monday. Last Tuesday “As for the next board meeting on May 4, the current data suggests that we must raise interest rates again. Still, this is not the time to stop. Moreover, I do not have a crystal ball; It will depend on economic data, but the analysis indicates that it would be inappropriate to leave the deposit rate at the current level of 3%.”
The overall potential drawback for the euro is that German and Spanish inflation figures were surprisingly on the negative side of expectations for March last week, while the consensus among economists suggests that Tuesday’s eurozone data may not do much to support the euro. On average, economists are looking to see the edge of Europe’s inflation rate higher from 6.9% to 7% when April data is released on Tuesday, while the more important core rate is expected to drop from 5.7% to 5.6% in a result that would have uncertain implications. on the policy of the European Central Bank.
Commenting on the future of the euro / dollar. says Lee Hardman, senior currency analyst at MUFG and recent buyer of EUR/USD. “We still prefer a stronger Euro and maintain our long EUR/USD trade idea. We do not expect the ECB policy update to change material support from higher yields for a stronger euro,” and on Friday the analyst reiterated his forecast for the EUR/USD to reach 1.1350 soon.
- There is no change in my technical view of the performance of the price of the EUR/USD currency pair.
- The move around and above the psychological resistance 1.1000 will continue to support the bulls in more control over the performance of the EUR/USD.
- The next peaks, if this happens, will be 1.1065 and 1.1120, respectively, and this will depend on the path of tightening are both the European Central Bank and the US Federal Reserve.
On the other hand, according to the performance on the daily chart, the bears will move towards the support level 1.0920, which is less important for the general trend to turn bearish. The euro will interact today with the announcement of the inflation reading in the eurozone.
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