The EUR/USD recovered from earlier losses that dragged the pair towards its daily low of 1.0962 and is trading at around the 1.1020s area after inflation in the United States (US) proved to be stickier than expected, warranting further tightening by the Federal Reserve (Fed).

The EUR/USD remained supported by the 20-day EMA, which, acting as dynamic support, remains sought by buyers, as the pair has bounced from that area since mid-March. Additionally, the Relative STrengh Index (RSI) indicator continued to be in bullish territory, though its slope turned flat, as buyers took a respite after a failing attempt to 1.1100. If EUR/USD breaks the YTD high at 1.1095, 1.1100 would be up for grabs. Once conquered, buyers would look to challenge the 2021 cycle low turned resistance at 1.1186, ahead of 1.1200. On the flip side, the EUR/USD could remain sideways and test the 20-day EMA at 1.0955.

We maintain a buy on dip mentality for EURUSD, expecting a sustained break of 1.10 in the months ahead. The ECB risks skew towards the hawkish end, while other factors in our MRSI overlay framework, like equities, terms of trade, momentum, and inflation remain supportive of EUR outperformance. We continue to see EUR outperforming European peers like NOK, SEK, CHF, and GBP and like scaling back into EURGBP longs towards 0.88.

Also traders should stay cautious on break below 1.0960 zone as this would increase downside risk of testing pivotal supports at 1.0909 (Apr 17 trough) and 1.0874 (Fibo 38.2% of 1.0516/1.1095), loss of which would signal deeper correction.

EURUSD maintaining steady bullish stance above TL

Apr 29 2023