EUR/USD: Rebounding on Positive Investor Sentiment Ahead of US Inflation Data

Highlights

• Improved investor morale in Euro Zone, positive for Euro
• Dip in US Treasury yields supports Euro’s upward movement
• Decline in Euro Zone retail sales could hinder Euro’s performance

Overview

The Euro is rebounding against the U.S. Dollar after a four-day decline, rising to near its multi-week high reached last week, as the improvement in risk sentiment has helped drive the single currency up. A dip in U.S. Treasury yields has also supported the Euro’s upward movement, with investors preparing for a series of comments from Federal Reserve officials and the release of key U.S. consumer inflation data on Wednesday.

As of 12:58 GMT, the EUR/USD is trading at 1.0915, up 0.0054 or 0.50%, while the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $100.26, down $0.57 or -0.56% on Monday.

Euro Zone Investor Morale Improves in April, but Retail Sales Decline in February

Investor morale in the Euro Zone improved in April after a surprise dip in March, according to a report released earlier today.

The assessment of current conditions rose to the highest level in more than a year, resuming the improvement of recent months.

Sentix’s index for the Euro Zone climbed to -8.7 points in April from -11.1 in March, surpassing analysts’ expectations of a rise/fall to -9.9.

This positive development in investor sentiment could potentially boost the Euro’s performance in the near future.

However, the latest data released on Tuesday showed that Euro Zone retail sales decreased by 0.8% month-on-month in February, reflecting persistent inflation, rising borrowing costs, and recession fears that have hampered consumer spending.

On an annual basis, retail sales in the Euro Area fell by 3% in February. This decline in retail sales could potentially weigh on the Euro’s performance, as it suggests weaker economic growth in the region.

EUR/USD Higher on Improved Risk Sentiment and Dip in U.S. Treasury Yields

Overall, the Euro’s recent upward movement against the U.S. Dollar is driven by a combination of improved risk sentiment and a dip in U.S. Treasury yields.

While the positive report on investor morale in the Euro Zone is a good sign for the single currency, the decline in retail sales in the region could potentially hinder its performance.

The market will continue to closely monitor the upcoming comments from Federal Reserve officials and the release of U.S. consumer inflation data to assess the future trajectory of the EUR/USD pair.

EUR/USD Technical Analysis: Uptrend Reaffirmed with Trade Through 1.0974

Technically speaking, the EUR/USD is trending higher. A trade through 1.0974 will reaffirm the uptrend. The minor trend is also up. A trade through 1.0832 will change the minor trend to down. This will also shift momentum to the downside.

Support comes in at 1.0843, resistance at 1.0943. Trader reaction to the pivot at 1.0881 determining the direction of the EUR/USD into the close on Tuesday.