EUR/USD has lost its traction and declined towards the 1.09800 area on Friday. The negative shift seen in risk sentiment following the disappointing March Retail Sales data helps the US Dollar stay resilient against its rivals and weighs on the pair. 

Economic data came in mixed, with lower-than-expected numbers from Retail Sales, but Industrial Production and University of Michigan’s Consumer Sentiment rose more than expected.

Following data and comments, US yields jumped. The 2-year Treasury yield rose from under 4% to 4.10% and the 10-year from 3.45% to 3.52%. Eurozone bond yields are also rising but at a slower pace.

Despite Friday’s reversal, EUR/USD is still on its way to the highest weekly close in a year. It is holding up, however, the retreat from the highs raises doubts about more gains for the next session.

EUR/USD climbed out of the ascending regression channel and the Relative Strength Index (RSI) indicator on the four-hour chart rose toward 80, pointing to overbought conditions.

In case the pair stages a correction and returned within the ascending channel, 1.1020 (mid-point of the channel), 1.1000 (psychological level, static level) and 1.0970 (20-period Simple Moving Average (SMA)) align as support levels.

On the upside, 1.1100 (psychological level) aligns as the next bullish target ahead of 1.1150 (static level from March 2022).

Potential dips should be shallow in current euro-positive environment and offer better prices to re-enter larger uptrend, with 1.10 level offering initial support, followed by broken 100WMA/10DMA (1.0945) and 20DMA (1.0880) expected to contain extended dips and mark a healthy correction ahead of fresh push higher.

Bullish momentum has faded on lower degree trends

Apr 14 2023