The EUR/USD pair has managed to surpass the 1.0800 mark, despite concerns over the Fed's potential rate cuts in September, as reflected by the stubborn US PPI. The monthly figures have exceeded expectations, while the annual PPI for April has met the estimates.
In the Eurozone, the price index is expected to rise to 2% as the service inflation rate decreases to 3.7%.
In the early American session on Tuesday, EUR/USD has made slight progress above the significant resistance level of 1.0800. Despite the US Producer Price Index (PPI) data for April showing persistence, the primary currency pair has shown strength.
According to the US Bureau of Labor Statistics (BLS), both the monthly headline and core PPI saw significant growth of 0.5%, surpassing the expected values of 0.3% and 0.2%, respectively. Annual growth for headline and core PPI also aligned with estimates at 2.2% and 2.4%, respectively.
The anticipation of high PPI numbers may negatively impact investors' trust in the Fed's plans to lower interest rates at the September meeting. To gain better understanding, investors will closely monitor the US CPI data for April, set to be released on Wednesday.
Following the release of the US Producer Price Index, Jerome Powell, the Chair of the Federal Reserve, stated that the report shows a general mix of results. In response to questions about the future of interest rates, Powell dismissed concerns of a potential increase but highlighted the importance of keeping interest rates at their current levels for a prolonged period in order to decrease inflation.
EUR/USD holds its gains despite strong US PPI report
Despite a higher-than-expected US PPI report, which has caused concerns about the Fed potentially lowering interest rates starting from the September meeting, the US Dollar is dropping and supporting the upward trend of the major currency pair.
The US Dollar Index (DXY), which monitors the value of the Greenback against six major currencies, has fallen below the crucial support level of 105.00.
To gain more clarity, investors will be closely watching the consumer inflation data for the month of April. This will be the most important event of the week.
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In the first quarter of the year, US CPI was higher than expected due to a tight labor market and strong household spending. Investors will pay close attention to the data as continued high readings could lead traders to reduce their bets on a Fed rate cut in September.
A rise in inflation could also offset the optimism for a Fed rate cut, which is based on an easing labor market.
Across the Atlantic, investors are eagerly awaiting the preliminary Q1 Gross Domestic Product (GDP) data for the Eurozone, which is scheduled to be released on Wednesday. The GDP growth is expected to have remained stable.
Projections suggest a steady growth rate of 0.3% on a quarterly basis and 0.4% on an annualized basis. Strong GDP growth would bring relief to the policymakers at the European Central Bank (ECB), who are planning to lower interest rates starting from the June meeting.
The Eurozone economy is on track to meet the desired inflation rate of 2%, as seen in the service inflation, which remained consistent at 4% between November and March but has now dropped to 3.7% in April. Financial markets have already priced in a potential 70 basis points (bps) interest rate cut by the ECB this year.
EUR/USD Targets to Maintain Stability Above 1.0800
The currency pair EUR/USD is currently trading near the resistance level of 1.0800. The 200-day Exponential Moving Average (EMA) located at 1.0800 is proving to be a formidable obstacle for those bullish on the Euro.
Despite the fact that the primary currency pair is currently headed towards the lower boundary of the Symmetrical Triangle pattern on a daily chart, which is drawn from the 1.1140 high on December 28th, the upper boundary of the triangle pattern is identified as the 1.0448 low from October 3rd.
This formation of a Symmetrical Triangle displays a significant decrease in volatility.
The RSI (Relative Strength Index) with a 14-period oscillates within the range of 40.00-60.00, indicating a state of uncertainty among those involved in the market.