EUR/USD Shrugs Off U.S. CPI Data, Rebounds To 1.0550
Alex Boltyan | May 11, 2022 12:57PM ET
The EUR/USD pair advances modestly on Wednesday after taking a round-trip to the 1.0500 area on the back of higher-than-expected U.S. CPI data.
On Wednesday, data showed U.S. Consumer Price Index rose by 8.3% over the year to April, above the 8.1% expected. Excluding food and energy, the CPI grew by 6.2%, also above the 6.0% forecasted by analysts. Still, both readings are below March’s four-decade high, which supports the view that inflation may have peaked.
The EUR/USD pair hit a low of 1.0501 as the dollar strengthened as a knee-jerk reaction but quickly returned to pre-data levels around 1.0550. From a broader perspective, the EUR/USD pair has entered a consolidation phase this week after bottoming out at a five-year low of 1.0470 last Thursday.
Following Federal Reserve’s decision to hike interest rates by 50 basis points on May 4, the EUR/USD stabilized in the 1.0490-1.0600 range as the market saw its expectations realized.
The divergence between the Fed and the European Central Bank has kept the EUR/USD in a downtrend over the last months. However, investors have begun to think that the ECB would have no choice but to raise rates in July, which has helped the euro to pare losses.
From a technical standpoint, the short-term perspective remains neutral to slightly bearish for the EUR/USD according to the daily chart. Although it has no slope, the RSI remains below its midline, while the MACD histogram is now printing green bars, reflecting the recent rangebound trading. Still, the price holds below its main moving averages and remains extremely close to its cycle low.
A break below the 1.0490 area could send the pair quickly to the 1.0470 low. If this level is lost, bearish momentum could revive with the following targets seen at the 1.0400 psychological level and then 1.0340, 2017 low. On the other hand, a break above 1.0600 could pave the way to the 20-day SMA at 1.0650. The next resistance area is seen at 1.0750.
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