EUR/USD traded modestly lower on Friday, trading around 1.1430 at the time of writing, having hit levels around 1.1500 the previous day. The euro was boosted by hawkish statements from the European Central Bank (ECB) on Thursday, but markets turned more cautious as they await the release of the US Non-Farm Payrolls (NFP) report later in the day. The ECB cut interest rates by 25 basis points, lowering the key deposit rate to 2.0%, as widely expected, following its monetary policy meeting on Thursday. Nonetheless, ECB President Christine Lagarde struck an exceptionally hawkish tone, suggesting that the easing cycle may be coming to an end.
The euro (EUR) rose alongside German Bunds as investors’ hopes for further ECB easing in the coming months waned.
Conversely, the US dollar (USD) continued to weaken, weighed down by a slew of downbeat macroeconomic data this week and a lack of progress in US President Donald Trump’s talks with trading partners.
Trump’s long-awaited call with Chinese President Xi Jinping failed to bring any progress in the uncertain trade relationship between the world’s two largest economies, but the Republican’s positive comments have reassured investors to some extent.
Technical analysis: EUR/USD needs to hold above 1.1400 to confirm bullish bias
EUR/USD is trading in a positive trend, making higher highs and higher lows since mid-May, as shown in the 4-hour chart below. On Thursday, the pair encountered selling at the psychological 1.1500 level, but the overall trend remains positive despite the weakening bullish momentum.
On Friday, the pair pulled back as the price approached the key support level of 1.1400 (round number, upward sloping trendline) as investors were cautious ahead of the release of the US non-farm payrolls report. Below this level, the bullish trend will be challenged, with bears focusing on 1.1360 and 1.1315, which have been acting as support and resistance since mid-April.
On the upside, resistance lies at 1.1495, which capped Thursday’s rally, and the 261.8% Fibonacci extension at 1.1585.
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