The Euro (EUR) experienced a modest decline against the US Dollar (USD) on Friday, trading at 1.1719, a retreat from previous highs that exceeded 1.1740 on Thursday. Despite the drop, the pair has managed to maintain most of the gains from the previous day, although market activity is somewhat subdued due to the May 1 labor holiday.
On Thursday, the currency pair rebounded as investors focused on strong inflation figures from the Eurozone, overshadowing the simultaneous release of disappointing Gross Domestic Product (GDP) data. Later that day, the European Central Bank (ECB) announced that it would keep its benchmark interest rate steady at 2%, aligning with market expectations. However, ECB President Christine Lagarde’s hawkish remarks fueled trader confidence; she downplayed concerns about stagflation and indicated that discussions regarding a potential interest rate hike in June were on the table.
Meanwhile, in the United States, Wall Street reached new record highs, bolstered by positive quarterly earnings from American companies. This surge in equities has mitigated concerns regarding elevated oil prices, creating a risk appetite that has led to decreased demand for the traditionally safe-haven US Dollar.
In the Middle East, tensions remain heightened as the US and Iran exchanged threats, and a blockade in the Strait of Hormuz has now reached its third month without a feasible solution for reopening it. Oil prices have surged above the critical $100 mark, with Brent Crude trading at $113.94, placing enormous pressure on Eurozone countries that rely heavily on imported crude. Analysts suggest that these high oil prices may adversely affect the Euro in the long term.
From a technical standpoint, the EUR/USD pair remains confined within a fluctuating range of approximately 100 pips. Support above 1.1650 has held against bearish pressures, while attempts to break through the 1.1750 resistance level are proving challenging. The Relative Strength Index (RSI) on the 4-hour chart shows a modestly positive indicator, while the Moving Average Convergence Divergence (MACD) indicates a flattening momentum, reflecting a weakening bullish trend.
On the upside, the April 27 high around 1.1750 presents a formidable barrier for buyers, while a failure to maintain above the support levels within the 1.1675 to 1.1645 range could signal a deeper decline. A confirmation below these levels would open the path to retracement toward the 61.8% Fibonacci level, potentially targeting 1.1580, and further down to the lows around 1.1500 observed earlier in the month.
As developments unfold, the Eurozone’s economic indicators, including inflation data and trade balances, will remain critical in shaping the Euro’s trajectory against the Dollar. High inflation rates may compel the ECB to reconsider interest rate levels, whereas weak economic data could lead to downward pressures on the currency.
