The European currency shows mixed trading dynamics, consolidating near 1.0600 and local highs from April 27. The day before, EURUSD showed the strongest growth in the last few weeks, which was the market's reaction to the results of the two-day meeting of the US Federal Reserve.
As expected, the US regulator raised the interest rate by 50 basis points to the range of 0.75%?1.00% and announced the start of a quantitative tightening program, but it will not immediately reach the final volumes of purchases. From June 1, the Fed will start selling securities for a total of 47.5 billion dollars, after which it will increase the total monthly sales to 95 billion dollars within three months. The "hawks", who expected that the regulator would immediately bring purchases to the final amount, were somewhat disappointed by this decision. Additional pressure on the dollar was exerted by the rhetoric of the Chair of the US Federal Reserve, Jerome Powell, who said that the issue of raising the interest rate by 50 basis points would also be discussed at the next meetings. Thus, the risks that the indicator will be corrected at a more aggressive pace have almost completely disappeared.
In turn, pressure on the euro was exerted by frankly weak statistics on Retail Sales in the eurozone. In March, the indicator fell by 0.4% after rising by the same amount a month ago, and in annual terms, the pace slowed sharply from 5.2% to 0.8%, while analysts had expected an increase of 1.4%.
At the moment, eurozone household spending continues to grow strongly against the backdrop of rising gas and energy prices. Electricity rates, which nearly doubled in 2021, will add another 50% to the cost this year before a correction begins, according to World Bank statistics. The tightening of anti-Russian sanctions in connection with the escalation of the military conflict in Ukraine also contributes to the negative dynamics. The day before, the President of the European Commission, Ursula von der Leyen, announced the readiness to introduce a gradual embargo on crude oil for six months, and on oil products until the end of this year. If the EU countries fail to replace the volumes, the economy will face negative consequences: the already record inflation will continue to increase and it will become more difficult for companies to fulfill their obligations to customers, which will undoubtedly lead to stagnation.
On the daily chart, Bollinger Bands are moderately declining. The price range is slightly narrowing, staying spacious enough for the current activity level in the market. MACD is growing, maintaining a relatively strong buy signal, being located above the signal line. Stochastic is showing similar dynamics; however, the indicator line is rapidly approaching its highs, indicating the risks of overbought EUR in the ultra-short term.
Resistance levels: 1.0640, 1.069, 1.0726, 1.0767 | Support levels: 1.0576, 1.052, 1.047, 1.04
