The EUR/USD also reacted to the latest European inflation data.
- Sell the EUR/USD pair and a take-profit at 1.0740.
- Add a stop-loss at 1.0900.
- Timeline: 1 day.
- Set a buy-stop at 1.0875 and a take-profit at 1.0950.
- Add a stop-loss at 1.0800.
The EUR/USD pair continued retreating as hopes that the US will reach a debt limit agreement. It dropped as the US dollar index (DXY) jumped by 30 basis points to $102.70. The pair dropped to a low of 1.0810, the lowest level since April 3.
The market has been facing three key risks recently. One of these risks is the debt limit issue, which threatens to see the American economy go through a default. In a statement, House Speaker Kevin McCarthy said that he was optimistic that the country will not default. Joe Biden reiterated the same before his trip to Japan.
The other risk has been in the banking sector. There are signs that the banking sector is stabilizing after most regional bank stocks jumped. Western Alliance shares jumped by 13% while PacWest rose by over 21%. The SPDR Regional Bank ETF rose by over 7%.
The other risk is on the likelihood of a recession in the US. recent data shows that the American economy is growing at a slower pace. Numbers published on Wednesday showed that the country’s building permits dropped in April.
The EUR/USD also reacted to the latest European inflation data. Numbers by Eurostat showed that the headline consumer price index jumped to 7.0% while core inflation slipped slightly to 5.6%.
Therefore, there is a likelihood that the European Central Bank will continue hiking interest rates in the coming months. The Fed, on the other hand, is expected to maintain its rates and continue with its quantitative tightening (QT) policy.
The EUR/USD pair will react to a statement by Christine Lagarde, the head of the ECB. In the US, the key numbers to watch will be the Philadelphia Fed manufacturing index and initial jobless claims numbers.
The EUR to USD exchange rate continued falling as the US dollar index bounced back. It moved below the 38.2% Fibonacci Retracement point. The pair has moved below the 50-period moving average. It has dropped below the Ichimoku cloud indicator.
It has also moved below the lower side of the Bollinger Bands while the Relative Strength Index (RSI) has continued falling. Therefore, the pair will likely continue falling, with the next key support to watch being at 1.0743.
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