EUR/USD falls from 1.0600 and approaches 1.0555 on risk appetite

• EUR/USD posts gains for the week of around 1.30%.
• The dollar trims Thursday’s losses and remains higher on Friday amid positive sentiment.
• Members of the ECB Governing Council continued to express the need to tackle inflation.
• EUR/USD Price Forecast: Threatening to break below the 20 DMA, and once above, a move to 1.0500 is anticipated.

The EUR pulls back from weekly highs but remains above the 20-day moving average (DMA) at 1.0531 amid bullish sentiment session courtesy of additional stimulus from the People’s Bank of China (PBoC), which cut rates on the 5-year LPR from 4.6% to 4.45%, while concern about a global recession grows among financial analysts. At the time of writing this report, the EUR/USD it trades at 1.0552.

The US dollar weighs on the euro, despite the ECB’s bullish turn

The dollar recovers some ground on Friday and receives an upward offer from US equities. US Treasury yields are under pressure, although the 10-year yield is clinging to the 2.80% threshold, while the German 10-year yield hovers around the 1% threshold, a level last reached in June 2015.

The German producer price index (PPI) for April was published on the economic docket for the eurozone, which turned out to be hotter than expected. The monthly reading rose 2.8%, above the 1.4% expected, while on a yearly basis it expanded 33.5%, above the 31.5% estimate. The data does not alter the hawkish pivot of some members of the ECB council, who expressed that the central bank needs to go above 0%.

The EUR/USD pair recovered in the week thanks to the new expressions of hawks of the ECB by the members of the Governing Council (GC). On Friday, ECB CG member Ignazio Visco commented that the ECB may move out of negative rate territory, and that a hike in June is “certainly” out of the question. He later added that he expects a moderate recession if Russian gas is cut off.

Meanwhile, Bundesbank president and ECB board member Nagel said rate hikes could come soon, noting that negative rates are a thing of the past. Lately, Francois Villeroy, of the ECB, commented that the ECB’s priority in the short term is the fight against inflation and that it will comply.

EUR/USD Price Forecast: Technical Outlook

Friday’s price action leaves EUR/USD exposed to selling pressure if EUR bears manage to break below the 20 DMA. the low at 46.10 in negative territory as the week is about to end.

That said, the path of least resistance for the major is down. The first support for the EUR/USD would be the 20 DMA at 1.0531. A break below would expose the February 2017 lows around 1.0494, followed by the bottom of the Bollinger Bands at 1.0381 and the YoY low at 1.0353.

Technical levels