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EUR/USD Daily Chart Analysis

EUR/USD Closes Flat Amid Mixed Data; Key Technical Level at 1.0785 in Focus

On Thursday, the EUR/USD pair experienced notable volatility, ultimately ending the day nearly unchanged. This fluctuation was primarily due to contrasting economic data from both the Eurozone and the U.S. Initially, the Euro gained strength from positive economic indicators in the Eurozone, including strong May PMIs for both the Eurozone and Germany, and rising first-quarter wage data. These factors fueled concerns about persistent inflation and led to speculation that the European Central Bank (ECB) might delay further rate cuts after the anticipated easing on June 6. However, the Euro’s gains were short-lived as strong U.S. economic data overshadowed the Eurozone reports. Robust U.S. weekly jobless claims and unexpectedly strong May S&P Global PMIs suggested an improving U.S. business environment, raising doubts about imminent Federal Reserve rate cuts. Additionally, some Fed officials expressed willingness to increase rates if inflation stayed below the 2% target, contributing to the widening of the German-U.S. two-year yield spread and pushing EUR/USD down towards the critical support zone between 1.0790 and 1.0815.

Looking forward, market focus is shifting to upcoming U.S. economic data, including the second estimate of Q1 GDP, weekly jobless claims, and April PCE figures. Strong signs of ongoing economic growth and inflation pressures in the U.S. could further pressure EUR/USD downward. Currently, the pair is down by 0.07%, influenced by a weak risk appetite in Asia where stocks have declined. Bundesbank President Nagel’s upcoming speech is expected to be cautious on rate cuts after June, which could further impact the Euro’s performance. Additionally, U.S. durable goods orders and consumer sentiment data are key event risks for EUR/USD. From a technical perspective, the charts indicate negative momentum studies with the 10- and 21-day moving averages rising. Although the 21-day Bollinger bands are rising, suggesting an uptrend that has stalled, the overall signals remain net positive. A close below the 1.0785 21-DMA would shift the bias lower for the coming week, with initial support and resistance levels at the 1.0785 21-DMA and the 1.0861 New York high, respectively. The 1.0820/30 levels with 2.292 billion in options expiring on May 24th also present critical close strikes to watch.