EUR/USD Slips into Neutral Gear Ahead of Key U.S. Data

EUR/USD

Prediction: Decrease 

EUR/USD is currently in a short-term sideways state, fluctuating around the 1.1200 level after being rejected at the MA200 (1.1249). The market lacks clear momentum and is waiting for key data from the U.S., such as Retail Sales and a speech from Fed Chairman Powell at the end of the New York session. The overall sentiment has turned cautious after the previous strong uptrend stalled due to the lack of supporting factors.

FUNDAMENTAL ANALYSIS 

U.S. Economic Data and Monetary Policy Expectations

The U.S. April CPI index released yesterday increased by 0.3% m/m, lower than the expected

0.4%, reinforcing the likelihood that the Fed will not raise interest rates further this year.

U.S. retail sales data will be released today (May 15). The market expects a growth of 0.4% m/m. If the data is lower, it could further pressure the USD downward.

Fed Chairman Jerome Powell will speak after the retail sales data. Investors are waiting for a "dovish" signal as inflation slows and growth shows signs of weakening.

Bond Yields and Financial Market Movements

The U.S. 10-year Treasury yield has decreased to around 4.39% from a high of nearly 4.50% earlier this month. This reflects rising expectations for rate cuts.

U.S. stocks have recovered slightly, especially in the technology and consumer sectors, due to expectations that the Fed will maintain a "dovish" stance.

Developments in Europe

Eurozone Q1 GDP was reported at a 0.3% q/q increase, close to expectations, showing signs of stabilization in the region's economy.

Inflation in the Eurozone is gradually decreasing but still above the ECB's 2% target. This suggests the ECB may continue to keep interest rates high for an extended period.

China’s Actions and Indirect Impact

China reported weaker-than-expected credit data, raising concerns about global demand, which negatively impacts the EUR since the EU is a major trade partner of China.

However, China’s potential to increase economic stimulus in the near future creates expectations for a global trade recovery, which supports the overall market sentiment.

TECHNICAL ANALYSIS

Key Resistance Levels

• 1.1275: The nearest resistance, coinciding with the "Bear OB" region and EMA 89 – crucial. If broken, the price could target 1.1388.
• 1.1388 – 1.1488: A strong medium-term resistance zone, which was previously rejected multiple times.
• 1.1569 – 1.1579: A long-term strong resistance, which could be seen as the profit-taking zone for buyers if the price spikes.

Key Support Levels

• 1.1075: The nearest support, where a bottom was formed and buying pressure emerged.
• 1.0946: The next support, which is a previous bottom before the increase in early April.

Technical Indicators:

RSI (14): Currently at 48.55, indicating the market is in a neutral zone, with no overbought or oversold signals. Previously, RSI dropped to the oversold region and recovered, reflecting the emergence of buying pressure at the bottom.

Trading Volume: Increased significantly when the price rebounded from 1.1075, indicating the presence of buying power. However, if the volume does not sustain, the rebound may only be short-term.

 

 

 

 

 

 

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