The 23.6% retracement from last year, or 1.0730/1.0710, is currently acting as potential support for the EUR/USD pair. Although a little rebound is possible, the high that was achieved earlier this week at 1.0910 is probably going to be reached.
The key support channel needs to be well protected in order to prevent further declines in the market. Failure to protect the 1.0730 and 1.0710 support zones can cause the market to drop even farther, possibly all the way to the March low of 1.0510.
Fundamental Outlook on EUR/USD
The Federal Reserve stated on Thursday that the current economic data doesn’t support delaying a rate increase at the next policy meeting in June. This then confirms the market forecast that the US central bank will maintain higher interest rates for a longer period of time. A plan to raise the $31.4 trillion debt ceiling for the government is also likely to be debated on the House floor next week. Kevin McCarthy emphasized that the negotiations are in a better place than they were last week. This helps to sustain the dollar, coupled with the positive US economic data from Thursday.
Meanwhile, the euro remains unaffected by expectations of additional rate increases by the European Central Bank (ECB). Christine Lagarde, the president of the European Central Bank (ECB), said that efforts to curb stubbornly high inflation are still ongoing. The President also noted in her statement that there are some factors that can induce a significant spike in inflation in Europe. This statement failed to motivate traders to enter the bull market; rather, it seemed to make them a bit undecided.
Technical Outlook on EUR/USD
EUR/USD had a brief price consolidation after the market climbed to the $1.08000 price level between March 28 and April 3. The brief price consolidation at this level gave bulls the chance to secure a baseline for more adventure beyond the resistance level of $1.1000. The market then oscillated around the $1.1000 price level in a consolidation trend. Bears then began to regain control of the market on May 4, and the downward journey began. Currently, EUR/USD retraces the $1.08000 price level, which was near the point of contention in the last consolidation market.
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