EUR/USD Outlook: Euro Steadies Ahead of US PPI Data

• Business activity in the Euro Area expanded at a faster rate than that in the US in April.

• The euro has lost nearly 2.5% of its value against the dollar this year.

• Investors are awaiting the US PPI report.

The EUR/USD outlook is bullish, as the euro shows remarkable resilience ahead of US wholesale inflation data. Despite a small pullback, the pair has sustained its recent uptrend amid signs that the economic performance gap between the Eurozone and the US is closing.

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Notably, recent data has revealed some economic improvements that have eased pressure on the ECB to cut rates. Moreover, business activity in the Euro Area expanded faster than in the US in April. At the same time, employment and growth figures in the US missed forecasts. Therefore, as pressure eases off the ECB, there is more pressure on the Fed to cut interest rates. This has allowed the EUR/USD pair to rise despite looming ECB rate cuts.

Still, the euro has lost nearly 2.5% of its value against the dollar this year. This decline was mostly due to the divergence in policy outlooks between the ECB and the Fed. Markets expect the European Central Bank to cut rates three times this year. Meanwhile, the Fed might only cut twice. Moreover, this outlook could change with more inflation data from the US. The number of expected Fed cuts could be reduced if inflation beats forecasts.

Furthermore, investors will likely push back the timing of the first rate cut. Consequently, the euro would fall. On the other hand, easing inflation would solidify Fed rate cut bets, allowing the euro to continue recovering.

EUR/USD key events today

• US Core PPI m/m
• US PPI m/m
• Fed Chair Powell Speaks

EUR/USD technical outlook: Bulls challenge 1.0800 after retesting channel support

On the technical side, the EUR/USD price has risen to retest the 1.0800 resistance level. This comes after a big bounce from the 1.0725 support level. Here, the price made a bullish engulfing candle, respecting a solid support level comprising its bullish channel line and the 1.0725 level.

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After retesting its channel support, the price will likely rise to its channel resistance. However, to do that, bulls must break above 1.0800. Notably, EUR/USD is above the 30-SMA, and the RSI is above 50. Therefore, the bullish bias is strong. If this continues, the price will soon breach 1.0800.

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• Source: https://www.forexcrunch.com/blog/2024/05/14/eur-usd-outlook-euro-steadies-ahead-of-us-ppi-data/