EURUSD was growing on Wednesday morning despite yesterday's short-term correction. After reaching the level of 1.14537, the pair pulled back to 1.13632, but managed to stop falling again despite an expected rate cut by the European Central Bank (ECB).
The euro is supported by improving performance of key eurozone economies. Germany saw business activity hitting a 33-month high and Spain reported the number of unemployed dropping to 2.5 million for the first time in 17 years, which boosts confidence in the single currency. However, these positive signals are accompanied by weakness in Germany’s and Italy’s industrial sectors, limiting the euro's upside potential.
At the same time, eurozone’s May inflation fell to 1.9%, reinforcing the case for the ECB to cut rates at the upcoming meeting on Thursday. Yet, markets have already priced in this cut, so it has only a limited impact on the pair's direction, as investor now focus on the relative stability of Europe compared to the US.
Meanwhile, expectations remain low for further easing by the Federal Reserve (Fed), despite weaker economic growth. The latest US labor market data paints a contradictory picture. A rise in job openings to 7.39 million (above the forecast) was offset by a record number of layoffs. It points to a relatively resilient labor market, but there is a risk of further softening. This weakens the dollar. Meanwhile, the US currency remains under pressure of trade tensions and declining government bond yields.
The technical picture for EURUSD shows a persistent uptrend, with the price above key support levels, such as 1.1200 and 1.1300. The pair is moving above the exponential moving averages EMA (20) and EMA (50), which confirms the current uptrend. The Relative Strength Index (RSI) is near 65, pointing to bullish momentum. On Wednesday, trading volumes (On Balance Volume) are showing positive momentum, which supports the current upward price movement.
Current recommendation:
Buy at the current price. Take profit – 1.15700. Stop loss – 1.13100.
This content is for informational purposes only and is not intended to be investing advice.
