EURUSD on its way to corrective growth with potential to reach 1.0740

The EURUSD currency pair is showing a downward trend after the statement of the Chairman of the Federal Reserve System (FRS) Jerome Powell that high interest rates can be maintained for a long time. 

The day before, the head of the U.S. central bank emphasized the need for an additional period of restrictive policy of the Fed. He noted lack of progress in reducing inflation in recent months, despite strong economic data from the U.S. This provides support for the dollar, which recently reached a 5-month-high.

Meanwhile, markets' hopes for the Fed's first-rate cut in June continue to wane. Investors chose September as the next guideline. According to CME FedWatch, the likelihood of interest rates remaining unchanged at the June meeting of the U.S. central bank increased to 84.8% from 78.7% on Monday.

Meanwhile, European Central Bank (ECB) officials continue to make the case for an interest rate cut in June. On Tuesday, French central bank chief Francois Villeroy de Galhau and ECB president Christine Lagarde spoke in this regard.

Both representatives of the ECB noted a steady decline in the eurozone's inflation rate, suggesting that the 2% target will be reached by next year, even if the path to that proves to be bumpy.

EURUSD quotes are in a downtrend on the H4 timeframe. At the same time, market participants have already taken into account the monetary policy targets of the Fed and the ECB, as the bearish movement has slowed down a lot. This indicates a possible corrective growth of the pair.  

Divergence of the Relative Strength Index indicator (standard values) on the H1 timeframe confirms a possible change in the price direction towards growth.

Signal:

The short-term outlook for EURUSD is to buy.

The target is at the level of 1.0740.

Part of the profit should be taken near the level of 1.0665.

A stop-loss could be placed at the level of 1.0520.

The bullish trend is short-term, so trade volume should not exceed 2% of your balance.