On Tuesday (April 22) during the European session, the EUR/USD exchange rate remained volatile around 1.15, not far from the recent high of 1.1572 set yesterday. US President Trump's remarks targeting Federal Reserve Chairman Powell once again have sparked widespread concerns in the market about the credibility of US economic policies, becoming a key factor in the continued pressure on the US dollar.
The latest round of US dollar depreciation has pushed the euro/dollar to break through the 1.150 mark, and above that, there is no obvious technical resistance until 1.20. ING foreign exchange analysts pointed out that the potential upward trend of EUR/USD towards 1.20 will be "entirely driven by USD factors", as the impact of this significant rise on the EUR will be minimal.
The Eurozone will release economic data this week, including PMI and Ifo surveys, as well as the European Central Bank's wage tracking report. In addition, several officials from the European Central Bank will also give speeches to fine tune last week's dovish message. European Central Bank President Lagarde will deliver a speech tonight.
The European Central Bank's professional forecast survey showed on Tuesday that the inflation expectation for the eurozone this year is 2.2%, slightly higher than the 2.1% forecast three months ago. However, analysts believe that the European Central Bank will still cut interest rates twice this year, which means that from a fundamental perspective, the strength of the euro is mainly attributed to the weakness of the US dollar rather than its own strengthening.
Technical analyst interpretation:
From the 120 minute chart, the EUR/USD is currently trading around 1.15, far above the medium-term uptrend line and some moving averages, indicating strong upward momentum. The MACD indicator is running above the zero axis, and the RSI indicator reading is 54.4429, indicating that the exchange rate is still in an upward channel. Currently, the exchange rate is testing support at the 1.1480 level, with resistance above the previous high of 1.1572. It is worth noting that RSI has not yet reached the overbought zone, leaving room for further upward movement.
From the daily chart analysis, the euro/dollar shows a more obvious upward trend. Since the low point of 1.0177, the exchange rate has formed a clear upward channel. The RSI index has reached 73.8731 and has entered the overbought area, which may indicate the need for some adjustment in the short term. The MACD bar chart shows that the positive momentum remains strong, although there are slight signs of weakening, overall it still supports the continuation of the upward trend. On the daily chart, the exchange rate remains stable at the support level of 1.1400, while 1.1572 above represents short-term resistance.
Market sentiment observation
The current market confidence in the US dollar is experiencing a serious crisis, mainly due to pressure from US President Trump on the Federal Reserve and widely controversial policy positions. Market liquidity is flowing out of US dollar assets, and the euro, as the main reserve currency substitute, is benefiting from it. The Fear and Greed Index clearly leans towards the greedy region, reflecting that market participants are actively pursuing the upward trend of the euro.
It is worth noting that although there are obvious signs of overbought on the technical side of the euro/dollar, the market may ignore these technical warnings until the crisis of trust in the dollar subsides. Currently, institutional investors generally believe that even if the euro/dollar is expected to fluctuate within the range of 1.14-1.15 by the end of the year, it is still possible to break through the 1.20 mark in the short term.
Future prospects
Long outlook: If the Federal Reserve cuts interest rates under pressure from Trump, the euro/dollar is expected to break through 1.16 and move towards the 1.20 level. In this situation, the crisis of trust in the US dollar will further deepen, driving funds to continue pouring into the euro. The position of the euro as the main reserve currency will be strengthened, although its own fundamentals do not support such a high valuation. Technically, after breaking through 1.1572, the exchange rate will face challenges from the 1.1609 (138.2% Fibonacci extension) and 1.1700 integer levels.
Short outlook: Considering the sluggish economic growth in the eurozone and the dovish stance of the European Central Bank, the rise of the euro/dollar may lack sustainability. Once the crisis of trust in the US dollar eases, the exchange rate may quickly fall back to a level more in line with fundamentals. Technically, short-term support is at 1.1457 (123.6% Fibonacci extension), and if it falls, it may rebound to 1.1213 (September 2024 high). The mid-term key support is around 1.1097 (20 day moving average), and a breakthrough at this level may mark the end of the upward trend.
