EUR/USD Pauses Before Data Deluge, Eyes on ECB Policy

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The Euro (EUR) struggles to gain traction above the key resistance level of 1.0700 against the US Dollar (USD) on Monday. The currency pair awaits a data-heavy week in both the Eurozone and the US, which could influence future central bank decisions.

Eurozone Data in Focus: Rate Cuts on the Horizon?

The Eurozone will release crucial economic indicators this week, including preliminary GDP figures for Q1 and April’s Consumer Price Index (CPI) data, scheduled for Tuesday. These reports will likely shape market expectations regarding interest rate cuts by the European Central Bank (ECB).

Currently, investors anticipate the ECB to initiate cuts to its Main Refinancing Operations Rate as early as June, with policymakers acknowledging the possibility. Recent comments from ECB officials reinforce this sentiment.

ECB Divided on Rate Cut Pace

While a June rate cut appears likely, the extent of future easing remains uncertain. ECB Governing Council member François Villeroy de Galhau advocated for additional cuts “at a pragmatic pace” following a potential June move. However, Bundesbank Chief Joachim Nagel expressed concerns about high service sector inflation and remains unconvinced about inflation returning to target quickly.

Mixed German Inflation Data Clouds Outlook

Preliminary German inflation data for April presented a mixed picture. The annual Harmonized Index of Consumer Prices (HICP) rose above expectations at 2.4%, but core inflation, excluding volatile food and energy prices, grew slightly slower than anticipated at 2.2%.

Technical Analysis: EUR/USD Seeks Direction

The EUR/USD pair hovers near 1.0700, attempting to establish a foothold above the key resistance level. The short-term outlook remains unclear, with the 20-day Exponential Moving Average (EMA) at 1.0720 acting as a significant hurdle for the Euro bulls. The long-term trend also suggests weakness, with the 200-day EMA currently positioned near 1.0800 and sloping downwards.

The Relative Strength Index (RSI) sits within the 40.00-60.00 range, indicating potential consolidation ahead. A symmetrical triangle formation on the daily chart highlights a period of compressed volatility. A breakout above the triangle’s upward trendline (drawn from the October 3 low) or below its downward trendline (drawn from the December 28 high) could provide clearer direction.


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