EURUSD falls for the second day in a row, weighed down by a number of reasons.
The EURUSD pair is on the defensive for the second day in a row on Tuesday, trading below the crucial 1.1000 level during the Asian session. The overnight significant jump in US Treasury bond rates, aided by confidence that the US banking sector is not on the verge of a larger catastrophe, continues to operate as a tailwind for the US Dollar (USD) and exerts some pressure on the major.
The shared currency, on the other hand, is pulled down by the disappointing Eurozone statistics reported on Monday, which adds to the negative tone around the pair.
German industrial production fell -3.4% month on month in March, above the -1.3% decline predicted. The Eurozone Sentix Investor Confidence indicator fell more than predicted in May, falling to -13.1. from -8.7 the previous month. Furthermore, the Current Situation Index plummeted to -9.0 in May, down from -2.3 in April, while the Expectations Index plunged to -19.0, its lowest level since December 2022. The figures rekindled recession fears and overshadowed hawkish remarks by a member of the European Central Bank (ECB).
The ECB-Fed policy divergence is expected to contain the downside ahead of the US CPI.
It is worth noting that Dutch Central Bank President Klaas Knot stated on Sunday that the ECB interest rate rises are beginning to have an effect. But that more would be required to keep inflation under control. Knot added that he may still support raising rates from 3.25% to 5%, or perhaps higher.
If inflation proves to be more persistent than predicted. In contrast, the Federal Reserve (Fed) announced a stricter, data-driven strategy to boosting rates last week. further and paved the way for a halt to the year-long rate-hiking cycle as early as June.
Furthermore, markets have begun pricing in the potential of the Fed beginning. To decrease rates in the second half of this year. This, in turn, limits the Greenback’s upward potential and should provide some support for the EURUSD pair.
Traders also appear hesitant to put bold wagers, preferring to wait for the latest US consumer inflation numbers. To be released on Wednesday. The key US CPI report will shape market expectations regarding the Fed’s next policy action. Increasing USD demand and giving new directional impetus.
EURUSD Technical Outlook
Technically, the recent string of failures at the 1.1100 round-figure level might be the first hint of a likely bullish exhaustion.
However, it will be smart to wait for a prolonged break below the 1.0940 horizontal support. Before concluding that the EURUSD pair has bottomed out and is poised for further depreciation. Spot prices may then become susceptible, falling lower below the 1.0900 level and testing the 50-day Simple Moving Average (SMA). Which is now located in the mid-1.0800s.
The latter should serve as a critical mark. And if strongly violated, it will alter the bias in favor of bearish traders, paving the way for a deeper corrective drop.
In contrast, momentum over 1.1000 appears to be encountering some resistance at the 1.1000 level. 1.1050 is the area. Any additional strength may draw more sellers and keep the price limited at the 1.1100 round mark.
However, prolonged momentum over this level would be considered as a new trigger for bullish traders. Lifting the EURUSD pair towards the 1.1135-1.1140 intermediate hurdle on the way to the 1.1200 mark. The rising trend might continue till the 1.1265-1.1270 resistance zone.
