The Euro edged lower after bulls faced a double failure just under pivotal barrier at 1.0930 (Mar 23 spike high).
Dips were so far shallow, with limited negative impact from weaker than expected German labor data and suggesting limited consolidation before final break higher and acceleration towards targets at 1.1000/32 (psychological/2023 high of Feb 2).
The single currency remains underpinned by renewed risk appetite as tensions in banking continue to fade and confidence restores, with the EU inflation data adding to hawkish outlook on ECB monetary policy.
Although the bloc’s annualized inflation fell below expectations and posted record drop in March (6.9% vs 7.1% f/c and Feb 8.5%) signaling that inflation remains in a steady downtrend which accelerated in March, so called core inflation which excludes volatile components and seen as a better gauge of underlying price pressures, continues to rise and hit new record high in March (7.5% vs 7.4% In Feb).
The European Central Bank, after a series of rate hikes, stood aside in announcing their next actions and signaled that the further steps will be data dependent, but the latest comments from a number of policymakers that further raising of interest rates is likely to be needed to put high inflation under control and push it towards 2% target, add to positive signals for euro.
All eyes are now on US inflation and consumer spending data, due later today and expected to provide fresh direction for dollar.
US PCE price index, Fed’s closely watched gauge of inflation, is forecasted to drop to 5.1% in Feb after unexpected jump to 5.4% in Jan, warning that inflation regained traction after a steady descend in past few months.
Consumer spending, which accounts for more than two thirds of US economic activity, is expected to rise by 0.3% in Feb after unexpected 1.8% jump in Jan, which fueled market expectations for fed’s further policy tightening.
The picture on daily chart remains bullish but weaker positive momentum, signals a pause in the latest rally.
Bulls need a weekly close above cracked Fibo barrier at 1.0910 (76.4% retracement of 1.1032/1.0516) after last week’s failure and sustained break of 1.0930 pivot to spark fresh acceleration higher.
Rising 10DMA (1.0820) offers solid support, which should contain dips, although deeper pullback towards 1.0771/57 (Fibo 38.2% of 1.0516/1.0930 / top of thickening daily cloud) cannot be ruled out.
Only extension and close below cloud base (1.0727) would sideline bulls and signal a double-top (1.0930/26).
Res: 1.0930; 1.0951; 1.1000; 1.1032.
Sup: 1.0873; 1.0832; 1.0820; 1.0771.