The EUR/USD has retreated towards 1.0950 during the European session due to a negative shift in market sentiment and an increase in US Treasury bond yields. The US dollar has been holding strong amidst this renewed upside, supported by cautious investors. The Relative Strength Index (RSI) indicator on the four-hour chart has started to edge lower, indicating buyer hesitancy.
Resistance levels for the EUR/USD are at 1.0970, 1.1000, and 1.1030, while support levels are at 1.0950, 1.0920, and 1.0900. The pair has been struggling to build on Tuesday’s recovery gains and could continue to fluctuate in a tight range while investors await the next catalyst.
The US Dollar Index closed positively on Tuesday after a two-day rally, despite hawkish remarks by St. Louis Federal Reserve President James Bullard and Atlanta Fed President Raphael Bostic.
The CME Group FedWatch Tool suggests that the USD may not have much room left on the upside, with markets currently pricing in a more than 80% probability of one more 25 basis points Federal Reserve rate hike in May.
Later in the day, Eurostat will release the Harmonized Index of Consumer Prices (HICP) data for March, which is unlikely to trigger a market reaction as it is a revision of the flash estimate. The Federal Reserve’s Beige Book will also be looked upon for fresh impetus.
ECB Chief Economist Philip Lane and Governing Council member Isabel Schnabel will deliver speeches later in the day, with ECB policy makers considering raising the policy rate by 25 or 50 bps at the upcoming meeting.
However, the risk perception may impact the pair’s action in the second half of the day, with US stock index futures losing between 0.3% and 0.5% on the day and a negative opening in Wall Street potentially weighing on EUR/USD.
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