The appreciation of the euro against the US dollar may be hindering due to encountering a notable obstacle, despite mounting prospects for additional tightening by the European Central Bank (ECB).
The prospects of additional interest rate hikes by the European Central Bank (ECB) have increased due to an alleviation of concerns regarding the banking sector. Furthermore, there has been a recent shift in tone towards a hawkish stance from ECB officials. Joachim Nagel, the Chief of the German central bank, urged for an increase in rates to prevent rapid price growth from taking root. Similarly, Francois Villeroy de Galhau, the Chief of the French central bank, and Philip Lane, the Chief Economist of the ECB, echoed that there is scope for rate increases in upcoming meetings.
EUR/USD Weekly Chart
In March, the Euro area core inflation reached an all-time high of 5.7% and may continue to increase before reaching its peak. In addition, long-term inflation expectations in the Euro area have risen to a one-month high. Consequently, the market is currently anticipating around three 25 basis point rate hikes from the European Central Bank (ECB) by September and has already fully priced in a 25 basis point hike at the next meeting.
Meanwhile, the market is also pricing in an 84% probability of a 25 basis point hike by the US Federal Reserve in May.
EUR/USD Daily Chart
The chart displayed above is color-coded, with blue candles indicating a Bullish phase, red candles representing a Bearish phase, and grey candles signifying Consolidation phases. It should be noted that these Consolidation phases may occur within either a Bullish or Bearish phase, and can sometimes form at the end of a trend. However, it is important to recognize that the colors of the candles do not predict future trends; they simply indicate the current trend. In fact, it is possible for the color of the candle to change in subsequent bars. False patterns may arise in relation to the 200-period moving average, or with regards to support/resistance levels in sideways/choppy markets. The author cannot guarantee the accuracy of this information and past performance does not guarantee future performance. Users of this information do so at their own risk.
The release of China’s GDP data, which exceeded expectations, has had a positive impact on the value of the EUR due to its close ties with China’s manufacturing sector. Specifically, the economy expanded by 4.5% on an annual basis during the first quarter of the year, which was higher than the projected growth rate of 4%, as well as the previous quarter’s growth rate of 2.9%.
EUR/USD: Uptrend in place, but some signs of fatigue
The daily technical chart for EUR/USD indicates an upward trend, as evidenced by the trending/momentum-based colour-coded candlestick charts. The higher-top-higher-bottom pattern since September has been maintained due to the recent rebound from strong support levels close to the January low of 1.0480.
EUR/USD 240-minute Chart
EUR/USD encounters significant resistance near the early February peak of 1.1035, which is in close proximity to the 200-week moving average currently situated around 1.1200. The weekly charts illustrate a negative divergence, indicating that EUR/USD’s upward trend over the past month is stalling despite continued growth. However, as long as the pair remains above the 1.0800-1.0900 range on the 240-minute charts, it is unlikely that upward pressure will diminish.
EUR/JPY Daily Chart
EUR/JPY: Barrier ahead
The recent breakout of EUR/JPY above the significant resistance level on a horizontal trendline from March 2022 at approximately 145.50 confirms a minor uptrend within the overall ascending channel since May 2022. Nevertheless, unless the cross surpasses the October peak of 148.40, the overarching trend remains primarily stagnant or slightly rising. Additional resistance lies on the upper boundary of the channel, currently around 150.50.
EUR/GBP Daily Chart
The currency pair EUR/GBP is currently confined within a specific range
Since the beginning of 2023, EUR/GBP has maintained a range-bound trajectory. Specifically, the upper limit of this range is circumscribed by a horizontal trendline positioned at approximately 0.8900, while its lower limit is marked by a horizontal trendline originating from January and located in the vicinity of the 200-day moving average at around 0.8700. Should a breakout transpire beyond this range, there exists potential for an accompanying shift equal to the width of the range, equivalent to 0.0200 units in the direction of said breakout.