EUR/USD Rate Surges to One-Month High
EUR/USD rallied to a one-month high on Thursday, propelled by the European Central Bank’s (ECB) decision to raise interest rates by 25 basis points to 3.5%, in line with expectations. The ECB’s move signaled its intention to continue tightening monetary policy, with the possibility of additional rate hikes in the future. Concurrently, the Federal Reserve’s decision to pause its tightening cycle was interpreted by the market as a potential end to monetary tightening in the United States.
As a result, the US dollar faced selling pressure and experienced rapid depreciation, benefitting EUR/USD rate. The currency pair climbed to $1.0962, nearing its early-April high of $1.0973. The next key psychological level to watch is $1.10, which may temporarily impede further upward movement.
In the event of potential downward movements, the 55-day simple moving average (SMA) at $1.0884 is expected to provide support for EUR/USD.
Wall Street Surge and Declining US Yields Weigh on the US Dollar
The US dollar faced downward pressure as Wall Street experienced a significant jump and US yields declined. Meanwhile, the Euro remained resilient following the hawkish tone expressed by the European Central Bank (ECB). These factors contributed to the EUR/USD’s upward momentum.
The EUR/USD surged on Thursday, reaching a one-month high at 1.0952, suggesting that the rally may not be over yet. Boosted by the ECB’s hawkish stance and the broad-based weakness of the US dollar, the currency pair recorded its strongest performance in months.
During its recent meeting, the ECB raised interest rates as expected and left the forward guidance unchanged. President Christine Lagarde indicated that another rate hike in July is the most likely scenario, while inflation forecasts were revised upward. Consequently, market participants have priced in a 25 basis point rate hike at the next meeting.
Strong Momentum Continues for EUR/USD, Eyes on Key Resistance Levels
German bond yields rose while US Treasury yields declined, contributing to the EUR/USD’s upward trajectory. Despite Federal Reserve Chair Powell’s hawkish comments on Wednesday, the US dollar failed to sustain gains. The sentiment improved in the market, and positive US economic data further weakened the greenback. US stocks concluded the day with gains of over 1%.
The Eurozone’s inflation data is coming on Friday. However, the market is not anticipating its final estimations to have a significant impact. On the other hand, the University of Michigan Consumer Sentiment Index is preparing for release in the US. Investors will be watching closely as they continue to digest the outcomes of recent central bank meetings.
Euro Rally Supported by ECB Rate Hike, Federal Reserve’s Monetary Policy Pause
The EUR/USD rate is currently trading above the 1.0950 area, representing immediate resistance. Despite showing overbought technical readings across charts, the currency pair’s recent gains suggest the potential for further upside movement. This resurgence has put the key psychological level of 1.1000 back into play.
On the weekly chart, the Euro to Dollar exchange rate has surpassed the 20-week Simple Moving Average (SMA), signaling a bullish indication. Looking ahead, fresh highs seem likely above 1.0940 in the Asian session. However, a break below 1.0940 could lead to an extension of the correction, potentially targeting 1.0905. The bullish bias remains intact as long as the Euro holds above 1.0810/20, where the 20 and 200 SMAs intersect on the 4-hour chart.
Technical Analysis Suggests Positive Outlook for EUR/USD Exchange Rate
There is a possibility that the EUR/USD exchange rate could reach 1.133 by the end of 2023. The analysis takes into account key price trends and indicators to forecast the potential movement of the currency pair.
The buying Euro made a strong rally against the US dollar on Thursday, surpassing the critical level of 1.0900 and reaching its highest point in five weeks. Technical analysis indicates overbought conditions for the EUR/USD rate in the near term, but the hawkish commentary from the European Central Bank (ECB) could limit any corrective decline.
The ECB’s decision to raise interest rates by 25 basis points, in line with expectations, along with upward revisions to inflation projections, fueled the euro’s rally. Meanwhile, disappointing Initial Jobless Claims data in the United States maintained selling pressure on the US dollar.
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