- EUR/USD halts three-day recovery move as USD recovers again.
- Comments from ECB’s Klaas Knot fuel the bullish wedge breakout, but the 21-day SMA will be a tough nut for EUR bulls to crack.
- Immediate support is found at 1.0488 as attention turns to Eurozone inflation.
EUR/USD is quoting near 1.0520, having hit fresh multi-day highs at 1.0564 earlier in the Asian session.
The latest pullback in the pair could be related to deteriorating market sentiment, which has rekindled the appeal of the US dollar as a safe haven. Weaker Chinese data and concerns about the prospects for aggressive Fed tightening have spooked investors.
On Tuesday, the EUR/USD rally found additional momentum after Klaas Knot, a member of the ECB Governing Council, said a 50 basis point rate hike should not be ruled out if data in the coming months suggests that the inflation is widening and piling up.
The pair spiked above the 1.0500 barrier following these comments and reclaimed the 1.0550 level. Euro bulls also welcomed the Eurozone GDP upward revision, as the USD accelerated its downward correction.
Looking ahead, dollar price action and persistent market sentiment will weigh on the currency pair ahead of the final Eurozone IPCA revision.
As seen on the daily chart, EUR/USD has stopped its recovery just below the downsloping 21-day SMA at 1.0575.
The 14-day RSI has turned flat after the latest bounce from lower levels, justifying the pair’s renewed weakness.
If selling pressure intensifies, Euro bears could challenge the wedge resistance, now turned support, at 1.0488.
Further down, Tuesday’s low at 1.0428 could be tested again.
EUR/USD daily chart
It can be seen that Tuesday’s rally led EUR/USD to break out of a falling wedge pattern to the upside, adding credence to the ongoing recovery from 5-year lows at 1.0350.
If the bulls regain control, immediate resistance will be at the daily high of 1.0564, above which the 21 SMA will be tested.
Acceptance above the latter is necessary to confirm a bullish turn on the EUR/USD.
EUR/USD additional levels
Source: Fx Street
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