The EUR/USD currency pair is in focus as it retreats from recent gains. The dollar has regained some momentum and is weighing on the pair. The absence of data releases in the eurozone has shifted the attention to the US calendar, with the Consumer Confidence tracked by the Conference Board in the spotlight. The recent knee-jerk reaction in the EUR/USD pair is seen as a short-term correction, as it remains poised for the continuation of the uptrend in the short-term horizon. The view is underpinned by the expectation that the ECB will raise the policy rate in June and July, supported by the hawkish narrative from the ECB’s rate setters.
EUR/USD Drops on Tuesday
The EUR/USD pair is experiencing selling pressure and is now trading in the low-1.1000s. The move is due to some tepid recovery in the dollar on Tuesday. After three consecutive sessions with gains, the pair is now succumbing to the better mood around the dollar.
Short-Term Horizon
Despite the current knee-jerk reaction, the EUR/USD pair is still poised for the continuation of the uptrend in the short-term horizon. The view is supported by the expectation that the ECB will raise the policy rate in June and July. The recent hawkish narrative from the ECB’s rate setters is contributing to this view.
US Consumer Confidence in the Limelight
The attention has shifted to the US calendar, where the Consumer Confidence tracked by the Conference Board will be the main focus. New Home Sales and the FHFA’s House Price Index will also be in the center of the debate.
Key Events in the Euro Area This Week
The key events in the euro area this week include Germany GfK Consumer Confidence (Wednesday), EMU Final Consumer Confidence, Economic Sentiment (Thursday), and Eurogroup Meeting, Germany labor market report/Advanced Inflation Rate/Flash Q1 GDP Growth Rate, EMU Flash Q1 GDP Growth Rate (Friday).
EUR/USD Levels to Watch
The EUR/USD pair is losing 0.16% and is trading at 1.1027. The next support is at 1.0909 (weekly low April 17), followed by 1.0831 (monthly low April 10) and finally 1.0788 (monthly low April 3). On the upside, a break above 1.1075 (2023 high April 14) would target 1.1100 (round level) en route to 1.1184 (weekly high March 21, 2022).
TRADE IDEA
CURRENCY PAIR: EUR/USD
CURRENT TREND: Bullish
POSITION: Buy
ENTRY PRICE: 1.0930 (the 100-period SMA on the four-hour chart and a key support level)
TAKE PROFIT: 1.1030 (the mid-point of the ascending channel and a potential resistance level)
STOP LOSS: 1.0870 (the Fibonacci 38.2% retracement of the latest uptrend and a static level)
FINAL THOUGHTS:
EUR/USD is trading in a bullish trend within an ascending channel, but it faces some resistance near 1.1000 and some support near 1.0930. The pair’s direction will depend on how these levels are breached or defended. A break above 1.1000 could open the door for further gains towards 1.1075 (the 2023 high) and beyond, while a break below 1.0900 could trigger a deeper correction towards 1.0825 (the 200-period SMA) or lower. Traders should also pay attention to the ECB vs Fed divergence, economic data releases, and risk sentiment factors that can influence EUR/USD. A buy signal for EUR/USD could be triggered by a break above 1.0970 (the upper limit of the ascending channel), while a sell signal could be triggered by a break below 1.0930 (the key support level).