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EUR/USD Price Analysis: First upside barrier emerges near 1.0850

  • EUR/USD rises to 1.0818 on Wednesday.
  • The constructive outlook remains intact above the 100-period EMA, with a bullish RSI,
  • The first bullish barrier is located at 1.0843, the initial support level is located in the regions of 1.0800-1.0810.

The EUR/USD pair is trading on a stronger note around 1.0818 on Wednesday during the early European session. The pair’s modest rebound is supported by a weaker Dollar. Thursday’s US Consumer Price Index (CPI) inflation data will be the highlight of this week.

Technically, the positive outlook for the major pair remains intact as it holds above the key 100-period exponential moving average (EMA) on the 4-hour chart. The path of least resistance is to the upside as the Relative Strength Index (RSI) is in the bullish territory near 57.0.

The immediate resistance level for EUR/USD will emerge at 1.0843, the upper boundary of the Bollinger Band. Any follow-through buying above this level will see a rally towards 1.0885, a high from May 15. The next hurdle is seen at 1.0915, a high from June 4.

On the other hand, the potential support level is located in the zone of 1.0800-1.0810, which represents the lower border of the Bollinger Band and the psychological figure. Further south, the next contention level to watch is 1.0790, the 100-period EMA. A break of this level will pave the way towards 1.0710, a low of July 2.

EUR/USD 4-hour chart

Euro FAQs

The Euro is the currency of the 20 European Union countries that belong to the Eurozone. It is the second most traded currency in the world, behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily volume of over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB), based in Frankfurt, Germany, is the reserve bank of the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s main mandate is to maintain price stability, which means controlling inflation or stimulating growth. Its main instrument is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher rates – generally benefit the Euro and vice versa. The Governing Council of the ECB takes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the national banks of the Eurozone and six permanent members, including ECB President Christine Lagarde.

Eurozone inflation data, as measured by the Harmonised Index of Consumer Prices (HICP), is an important econometric data point for the euro. If inflation rises more than expected, especially if it exceeds the ECB’s 2% target, the ECB is forced to raise interest rates to bring inflation back under control. Relatively high interest rates compared to their peers usually benefit the euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases measure the health of the economy and can influence the Euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the Euro. Conversely, if economic data is weak, the Euro is likely to fall. Economic data from the four largest Eurozone economies (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone economy.

Another important output for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly sought-after export products, its currency will appreciate due to the additional demand created by foreign buyers who wish to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.

Source: Fx Street

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