The pair rose to 1.0707 on Wednesday, driven by increased domestic risk appetite and the belief that the currency was significantly oversold against the US dollar. This resurgence indicates a temporary rebalancing in the currency market.
In the United States, recently published statistics provide material for economic analysis. New home sales in March showed a solid increase of 8.8% month-on-month, rising to 693,000 from 637,000 in February, exceeding expectations. The year-on-year comparison also reflected strength with an increase of 8.3%. Additionally, the weighted average price of a home sold in the U.S. rose to $524.8K from $488.6K in February, pointing to a market that is still vibrant despite elevated interest rates. .
These indicators are inherently pro-inflationary, suggesting that consumer behavior has adapted well to high interest rates. Continued activity in the housing market is likely to sustain inflationary pressures in the United States for an extended period. If interest rates were lowered, the attractiveness of purchasing property would increase even further, leading the Federal Reserve to maintain higher rates to mitigate economic overheating.
Despite significant efforts by the Federal Reserve to stabilize price pressures, the US economy shows a high degree of resilience to changing conditions. This adaptability has its pros and cons: it maintains economic vitality but complicates the management of inflation.
As long as the Federal Reserve keeps interest rates at the current high of 5.5% annually, the US dollar will likely maintain its strength. Any current weakening of the dollar is considered a temporary adjustment rather than a trend change.
EUR/USD technical analysis
On the H4 chart, the EUR/USD pair formed a consolidation range around 1.0666. A correction to 1.0713 occurred after the market broke out of the upward range. The pair is expected to drop to 1.0660 to retest from above before potentially developing another growth structure towards 1.0733. The move from 1.0601 is considered a correction of the last descending wave. After completing this corrective phase, a new bearish wave may begin until 1.0585. This outlook is supported by the MACD indicator, where the signal line is below zero but rising, while the histograms are at highs, poised to move lower.
On the first half chart, after reaching the local correction target at 1.0713, a fall to 1.0660 is expected. Subsequently, a growth wave may develop to 1.0733, the main correction target. The stochastic oscillator, currently below 50, is expected to fall to 20, supporting the possibility of further adjustments before any bullish move.
By RoboForex Analysis Department
Disclaimer
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
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