EUR/USD: Expecting a Possible Pullback - Fundamental Analysis

The EUR/USD pair is facing challenges within the key resistance zone of 1.0940-1.0950 as market participants eagerly await mid-tier data from both the European Union and the United States. Early on Friday morning in Europe, the pair is trading in a relatively subdued manner around the mid-1.0900s. Despite the previous day's significant surge, which marked its largest gain since early February and propelled it to a five-week high, the EUR/USD is struggling to extend its upward momentum.

At present, the EUR/USD is hovering above the immediate resistance level of 1.0950. Sustained consolidation above this level could potentially open the door for further gains, even though technical indicators suggest overbought conditions across various chart patterns. The recent upward movement has once again brought the 1.1000 area into consideration as a possible target for the pair.

On Thursday, the EUR/USD experienced a notable surge, reaching a one-month high of 1.0952. The pair has managed to hold onto its gains, indicating that the rally may not have reached its conclusion. This impressive performance was primarily driven by the European Central Bank's (ECB) hawkish stance and a general weakness in the US Dollar across the board.

As anticipated, the ECB raised its interest rates by 25 basis points, while keeping the forward guidance unchanged. ECB President Christine Lagarde emphasized that their work is not yet complete and expressed the likelihood of another rate hike in July as the most probable scenario. Additionally, inflation forecasts were revised higher, and market expectations already price in a 25 basis point hike at the upcoming meeting.

The rise in German bond yields and a decline in Treasury yields played a role in boosting the EUR/USD. Despite Federal Reserve Chair Jerome Powell's hawkish remarks on Wednesday, the impact on the US Dollar proved to be short-lived. The Greenback was also influenced by an improvement in overall risk sentiment and by US economic data. US stocks closed with gains of over 1%, further contributing to the Dollar's weakness.

On the data front, Friday will see the release of Eurozone inflation figures, but as they are final estimations, they are not expected to have a significant impact on the market. Meanwhile, the University of Michigan Consumer Sentiment Index is scheduled for publication in the US. Market participants will continue to digest the outcomes of recent central bank meetings as they assess the broader economic landscape.

Comment:

I forget to say that the RSI is at 80 Level RSI.

Trade active:

Trade active: