The euro held firm above the 1.1100 mark on Tuesday as traders positioned ahead of key U.S. inflation data. The EUR/USD pair traded at 1.1105 during early European hours, supported by a weakening U.S. dollar and an unexpected surge in Eurozone economic sentiment.
Monday’s optimism over a temporary easing in U.S.-China trade tensions had initially fueled demand for the dollar, pushing EUR/USD lower. However, sentiment shifted on Tuesday, with U.S. stock futures retreating and the dollar index (DXY) slipping from its monthly high.
Investors are cautious ahead of the April Consumer Price Index (CPI) release, which is expected to shape expectations for the Federal Reserve’s next policy move.
Eurozone Confidence Rebounds in May
Economic sentiment across the Eurozone recorded a sharp improvement in May, offering fresh support for the euro. The ZEW Economic Sentiment Index surged to 11.6, up from -18.5 in April—a 30.1-point rebound that reflects growing optimism among financial analysts and investors.
Germany, the bloc’s largest economy, also posted encouraging figures:
- Germany ZEW Index (May): 14.8 (vs. -15.6 in April)
- Eurozone ZEW Index (May): 11.6 (vs. -18.5 in April)
This sharp uptick suggests that economic recovery expectations are gaining traction despite recent headwinds from inflation and monetary tightening.
Technical Outlook for EUR/USD
EUR/USD continues to trade slightly above a critical support zone at 1.1080–1.1090, where the 50-day Simple Moving Average (SMA) intersects with the 61.8% Fibonacci retracement level of the recent rally.
Key technical levels to monitor:
Support:
- 1.1080–1.1090 (SMA + Fibonacci 61.8%)
- 1.1000 (psychological level)
- 1.0950 (Fibonacci 78.6%)
Resistance:
- 1.1170 (Fibonacci 50%)
- 1.1220 (200-period SMA)
- 1.1270 (Fibonacci 38.2%)
A drop below 1.1080 could invite bearish pressure, with 1.1000 likely acting as the next key support. On the upside, a move above 1.1170 would suggest a broader bullish trend continuation.
Outlook:
With inflation data on deck, EUR/USD traders remain alert. A stronger-than-expected CPI could lift the dollar and cap euro gains. However, a softer print would likely reinforce euro strength and push the pair toward the 1.1170 resistance level.