EURUSD reaches a five-week peak and probes a critical resistance area before the unveiling of US CPI figures

The Euro maintains a robust stance, reaching a fresh five-week high in early European trading on Wednesday. A new bullish wave, extending into the third consecutive day, breaches pivotal barriers around the 1.0830 zone, encompassing the 100-day moving average (1.0823), Fibonacci 61.8% retracement level of the downtrend from 1.0981 to 1.0601 (1.0836), and a narrow daily cloud spanning from 1.0820 to 1.0838.

The technical outlook on the daily chart remains bullish, characterized by strong positive momentum and a bullish cross between the daily Tenkan and Kijun-sen lines. However, caution is warranted as bulls encounter formidable resistance, particularly with the stochastic indicator signaling overbought conditions.

A bullish scenario necessitates a decisive breakthrough to signal the continuation of the broader uptrend towards targets at 1.0885 and 1.0916 (the April 9 high and Fibonacci 76.4% retracement level, respectively). Conversely, a failure to establish a clear upward break would alleviate upside pressure, though near-term sentiment remains biased upwards while the broken 200-day moving average and the 50% retracement level at 1.0790 hold as robust support.

Attention is now directed towards a pivotal economic event today—the release of the US inflation report for April. Forecasts indicate a potential easing in US inflation (CPI year-on-year for April forecasted at 3.4% compared to March’s 3.5%; Core CPI year-on-year for April forecasted at 3.6% compared to March’s 3.8%). A release in line with or below expectations could bolster expectations for a future rate cut by the Federal Reserve, thereby increasing pressure on the US dollar. Conversely, higher-than-expected figures could dampen expectations for policy easing, potentially strengthening the greenback.

Res: 1.0838; 1.0885; 1.0891; 1.0942
Sup: 1.0812; 1.0790; 1.0774; 1.0746