- EUR/USD is trading at one-month lows near 1.0800.
- Tone of weakness persists, given the strength of the dollar.
- US wholesale inflation data on Wednesday, ECB decides on Thursday.
The EUR/USD approached 1.0850 at the start of the European session, but only to later reverse direction and drop to 1.0814, approaching the day’s low of 1.0809 (1-month low). The pair is trading around 1.0825, with the negative tone and looking towards 1.0800, the 2022 floor.
The dollar remains firm in the market, putting pressure on the EUR/USD, supported by the yields of the Treasury bonds and the cautious climate in the markets. DXY rises for the ninth day in a row and trades at monthly highs above 100.00.
Behind the Tuesday’s US inflation data, which showed the highest annual rise since 1981 in the consumer price index (8.5%), on Wednesday it will be the turn of the producer price index, which would reach 10.6%.
In Europe, the focus is on what will be the meeting of the governing board of the European Central Bank. A change in the interest rate is not expected, but there will be announcements about purchase programs and, above all, future signs to deal with the rise in inflation. TD Securities analysts expect a “hawkish” change, with an announcement of the end of the purchase program (APP) by the end of May and clear signs that a rate hike will follow.
EUR/USD remains weak
The expectation of a tougher ECB are not slowing the decline of the EUR/USD, affected possible by the divergence of expectations with the Fed policy. Technically, the very short-term tone of weakness will remain intact as long as it remains below 1.0850. Above, the next resistance is at 1.0890. Further up, the key barrier can be found around 1.0940, which if broken would leave the Euro ripe for further rally.
In the opposite direction, the 1.0800 zone is the current critical support, after losing 1.0850. A drop below 1.0800 could see the Euro at the lowest level since May 2020. Next support can be seen around 1.0765/70.
Technical levels
Source: Fx Street
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