EUR/USD Gains Amid US Dollar Weakness and Hawkish ECB Outlook

EUR/USD remains strong in the mid-1.1000s as buyers aim for the highest levels since March 2022, recovering from the previous day's pullback from 1.1095 during early Thursday morning in Europe.

Arslan Butt•Thursday, April 27, 2023•2 min read

[[EUR/USD]] remains strong in the mid-1.1000s as buyers aim for the highest levels since March 2022, recovering from the previous day’s pullback from 1.1095 during early Thursday morning in Europe. The Euro pair is buoyed by the overall weakness of the US Dollar and hawkish expectations surrounding the European Central Bank (ECB), ahead of the anticipated release of Q1 GDP, which is expected to drop to an annualized rate of 2.0% compared to the previous 2.6%.

Interest rate futures indicate an increase in market expectations for the ECB to implement a 0.50% rate hike during the May monetary policy meeting. Although the odds remain low, the almost certain 25 basis points (bps) Fed rate hike and subsequent policy shift make the Eurozone’s central bank more attractive than its US counterpart, further supporting the EUR/USD climb despite mixed US data.

Recent data shows US Durable Goods Orders increased in March but failed to counterbalance concerns arising from previously released Consumer Confidence data. Notably, US PMIs were weaker than their European and German counterparts, implying greater economic optimism in Europe.

In other news, the US House of Representatives passed a bill allowing the government to negotiate an extension of the debt ceiling. However, political disagreements between Republicans and Democrats persist. The cautious optimism around US debt ceiling negotiations strengthens the Euro pair. Additionally, recent US tax receipt data enables Goldman Sachs to predict that the US Treasury Department can avoid federal payment defaults until late July, further bolstering the Euro pair.

Meanwhile, strong earnings reports from Microsoft and Alphabet Inc., Google’s parent company, kept Nasdaq steady. Nevertheless, growing concerns due to First Republic Bank’s (FRB) 20% share price drop on Wednesday, following a 50% decline the previous day, weigh on market sentiment and encourage EUR/USD bulls.

EUR/USD Technical Outlook:

The EUR/USD pair reached our initial target of 1.1075, encountering strong resistance and displaying a temporary bearish trend. However, the price is now showing positive signs, attempting to breach this level and set its sights on our next target of 1.1185.

The EMA50 continues to provide underlying support for the price, suggesting further gains in the upcoming sessions within the bullish channel visible on the chart. Failure to surpass 1.1075 could cause the price to rebound bearishly and test the 1.0980 – 1.0945 range before any new upward movement.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.