By Areena FxEUR/USD extends its recovery as mixed US data weighs on the US Dollar. The US Dollar may also now already have “a lot priced in” according to analysts at Commerzbank. The short-term trend could now be bullish on the 4-hour chart.
On Thursday, the EUR/USD pair climbed higher, reaching above 1.0700, as it continues to recover from its April lows around 1.0601. Recent mixed data from the US has dimmed the outlook for the US economy, weakening the US Dollar (USD), while the Euro (EUR) remains strong on robust services-sector data.
EUR/USD rises as US data mixed
EUR/USD’s upward movement began on Tuesday following preliminary US PMI data for April, indicating a slowdown in business activity and suggesting the economy may be feeling the impact of higher interest rates.
Although Wednesday saw positive Durable Goods Orders data in the US, showing a 2.6% increase in March, it failed to boost the USD significantly. Some attribute this to the fact that the Dollar may have already priced in expectations regarding future interest rate changes.
A lot is already priced into the Dollar” – Commerzbank
Analysts at Commerzbank suggest that the USD’s reaction to recent data indicates that the market has already factored in expectations for a soft landing of the economy and delayed rate cuts by the Federal Reserve.
As a result, the USD appears more sensitive to negative news than positive news, making it difficult for the Dollar to benefit from favorable economic data. This could affect how the market reacts to US first-quarter GDP data released on Thursday, with a miss potentially causing more harm to the USD than a beat.
Meanwhile, the Euro stabilizes as strong Services PMI data boosts expectations for services-sector inflation. This may influence the European Central Bank (ECB) as it considers interest rate cuts, although some ECB officials express caution.
Technical analysis suggests that EUR/USD has broken out of a short-term trading range, indicating a potential bullish trend with initial resistance at 1.0757. However, a break below the April 16 low of 1.0601 could revive the bearish trend, with downside targets at 1.0503 and 1.0448.