The EUR/USD currency pair is experiencing a period of consolidation in the mid-1.0900s during a slow start to Friday morning in Europe. Despite the struggle to extend yesterday’s significant gains, which marked the largest surge since early February, the pair continues to hover around a five-week high.
The previous day witnessed a rally in the Euro pair, driven by a more hawkish stance from the European Central Bank (ECB) in response to the Federal Reserve’s (Fed) announcements on Wednesday.
However, today’s market lacks any clear catalysts due to a light economic calendar and a cautious sentiment prevailing ahead of the final readings of Eurozone inflation data for May, specifically the Harmonized Index of Consumer Prices (HICP).
The preliminary readings of the Michigan Consumer Sentiment Index (CSI) for June, along with five-year inflation expectations, are also deemed important.
From a technical standpoint, immediate moves for the EUR/USD are hindered by a horizontal resistance zone, established since April 24, which spans between 1.0965 and 1.0940. Moreover, the overbought Relative Strength Index (RSI) adds to the challenges faced by the Euro bulls.
If the quote manages to overcome the 1.0965 barrier, the next obstacle lies at the 78.6% Fibonacci retracement level of the previous monthly decline, approximately around the psychological magnet of 1.1000. This level could potentially test the resolve of EUR/USD bulls before leading them towards the yearly high, achieved in April, which is situated near 1.1100.
On the downside, a breach of immediate support at 1.0940 may result in a downward move for the EUR/USD price towards the 61.8% Fibonacci retracement level near 1.0920. Subsequently, the Euro bears might find appeal at the 50% Fibonacci retracement level, located around 1.0865.
However, it is worth noting that unless a clear breakdown occurs below the support confluence of 1.0825-20, which encompasses the 200-SMA and an ascending trend line from June 07, the EUR/USD buyers can maintain their optimism.
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