- EUR/USD gains positive traction on Friday and breaks a six-day losing streak to a multi-year low.
- Risk appetite weighs on the safe-haven USD and prompts short-covering around the pair.
- Concerns about the economic downturn due to the crisis in Ukraine should continue to limit the euro’s gains.
- Investors are now looking to the Eurozone flash CPI and the US core PCE price index for a significant boost.
The pair EUR/USD has built on its intraday recovery move at the start of the European session on Friday and has risen to a new daily high, near the region of 1.0580 in the last hour.
The pair has seen a short covering move in the last day of the week and for now, has broken a six-day losing streak to a five-year low, around the 1.0470 area played the day before. A turnaround in global risk sentiment, as shown by a positive tone around the stock markets, triggered weakness in the safe-haven US dollar. This is seen as a key factor offering support to the EUR/USD pair, although any significant upside still seems elusive amid concerns about an energy crisis in Europe.
concerns increased after Russia announced a plan to stop gas flows to Poland and Bulgaria amid a standoff over fuel payments from “unfriendly” buyers in rubles. It is worth mentioning that the EU gets 40% of its gas and 30% of its oil from Russia, and has no easy alternatives if supplies are interrupted. This could make it difficult for the European Central Bank to tighten its monetary policy, with the Fed lagging behind.which in turn should act as a headwind for the common currency and cap the EUR/USD pair.
The Fed is expected to raise interest rates by 50 basis points when it meets on May 3-4, and again in June and July., and finally raise rates to around 3.0% by the end of the year to limit runaway inflation. Expectations were bolstered by aggressive comments from FOMC members last week, including Fed Chairman Jerome Powell. This, coupled with deteriorating global economic outlook amid COVID-19 lockdowns in Chinashould continue to benefit the dollar and attract fresh selling around the EUR/USD pair at higher levels.
Hence it is prudent to wait for a continuation of strong buying before confirming that the recent downtrend is over and positioning for further EUR/USD gains. Market participants are now awaiting the release of preliminary euro zone consumer inflation figures for a further boost. Later in the American session, investors will take cues from the release of the Fed’s preferred inflation gauge, the core PCE price index, which should provide some trading opportunities.
EUR/USD technical levels
Source: Fx Street
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