EUR/USD Surges Amid European Fiscal Stimulus and Dollar Weakness | Errante
Market Overview
The EUR/USD price extended rally beyond the 1.0700 mark on Wednesday during the European session. The pair gained as investors moved away from the US dollar amid increasing American economic concerns. The US dollar index hit a 3-month low around 105.00 area influenced by the European fiscal stimulus and growing expectations of Fed’s rate cut. Market participants eye ECB and US NFP ahead.
Fundamental Analysis
The Euro’s recent rally stems from the aggressive fiscal measures taken by the policymakers. The European Commission has unlocked EUR 650 billion for the defense. Moreover, Germany’s halt of debt brake and EUR 500 billion spending plan for infrastructure has further boosted the Eurozone economic growth.Meanwhile, US economic policy has heavily weighed on the greenback. US President’s latest trade tariffs have raised worries about economic growth slowdown rather than bringing inflation or expansion. According to Citi Bank analysts, the Fed could cut its rates in May as the Q1 GDP could contract 0.1% that may further weigh on the dollar.The major upcoming event for the EUR/USD is ECB’s much anticipated 25-bps rate cut, making its fifth consecutive rate cut. Investors will also focus on ECB President Lagarde’s commentary for further policy guidance. In the US, the attention lies on today’s US ADP employment and ISM Services data that could shape Fed’s next move.While the EUR/USD stays on the upward trajectory, trade policies like tariffs on German cars and other European products pose a strong risk that could limit the upside potential.
Technical Analysis
The daily chart shows the price has extended well above the key levels and 20-day SMA. The immediate resistance for the pair lies at 1.0730. The 14-day RSI is also near 70.0 which is overbought zone. Hence, a pullback towards 1.0665 can be expected ahead of 1.0600. However, as long as the price stays above 1.0480, the bulls will keep looking for fresh highs.
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