The Euro (EUR) trades lower for the third consecutive day against the US Dollar (USD) on Thursday. Price action remains contained within a roughly 80-pip range around 1.1600, but technical indicators show a fading momentum, with the US-Iran ceasefire under threat and US Personal Consumer Expenditures (PCE) Prices Index set to show rising inflationary pressures.
Market sentiment soured on Thursday following news reporting fresh US attacks on Iran. Tehran also affirmed that it launched a strike on a US base in the Gulf, and Kuwait reported interceptions of hostile missiles and drones. These skirmishes have pushed back hopes of a swift end to the war and the reopening of the Strait of Hormuz, boosting Brent Oil prices above $94 from lows below $92 on Wednesday.
From a wider perspective, however, the pair remains in range, supported by market hopes of an upcoming interest rate hike by the European Central Bank (ECB). The ECB Watch Tool shows a 91% chance that the central bank will hike its Deposit Rate by 25 basis points to 2.25% at their June 11 meeting, and recent comments by ECB speakers have endorsed this view.
ECB’s Chief Economist Philip Lane warned that second-round inflation effects from the energy shock will outlast the Iran conflict and affirmed that the bank must ensure that the feeling that inflation will remain high for a long time does not hold among the public or price setters. On Tuesday, ECB policymaker Isabel Schnabel said that the bank needs to hike rates in June.
In the US, all eyes will be on the Personal Consumption Expenditures (PCE) Price Index data for April, due later on the day. The Federal Reserve’s (Fed) favourite inflation gauge is expected to confirm that prices kept rising last month. If the market consensus is met, Fed hawks will have further reasons to push for tighter monetary policy, which might send US yields and the US Dollar soaring, hammering the EUR/USD.
Technical Analysis: The Euro keeps wavering within range
EUR/USD trades at 1.1610, maintaining a mildly bearish near-term bias yet with trading confined within an 80-pip range, between 1.1575 and 1.1660. The Relative Strength Index (RSI) remains below the midline, and a slightly negative Moving Average Convergence Divergence (MACD) reading hints at fading upside momentum, reflecting a market that remains vulnerable to additional downside probes.
Bears, however, should break support at the May 21 low, near 1.1575, to shift the focus towards the April bottom in the 1.1505-1.1525 area. A confirmation above the May 18 and 27 highs, in the area of 1.1660, on the contrary, would bring the May 14 low, at 1.1720, into focus ahead of May’s peak, in the 1.1790 area.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Personal Consumption Expenditures – Price Index (YoY)
The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Read more.
Economic Indicator
Core Personal Consumption Expenditures – Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Read more.
