The EUR/USD tumbled to fresh weekly lows around 1.2130-1.2135 after the US Core PCE Price Index rose by 3.1% annually for April, marking a 27-year high. This figure topped the market expectation of a 2.9% increase.
This number accelerated demand for the greenback, but this demand appears to have been limited by a muted performance by US long-term yields.
The figure once more validates higher inflation expectations. It stimulates more talk about whether the Fed will taper early or not, even as several banks have predicted that the Fed would start raising rates in 2022.
Later today, US President Joe Biden will unveil a $6 trillion US Budget for FY2022, which could also fuel expectations of faster recovery for the US economy and earlier-than-expected rate hikes.
Technical Levels to Watch
The active daily candle is now challenging the 1.21487 support and the lower border of the channel. If a break of these two support levels occurs, we can expect the bears to aim for the 1.20890 support level as the initial target of the breakdown move. Below this area, additional support comes in at the 1.2000 psychological price level, with 1.19472 and 1.18927 constituting other downside targets.
On the flip side, a bounce on the channel’s lower border/1.21487 support line allows for a price recovery towards 1.22416. However, a further push towards the channel’s upper border requires a break of 1.22416 and 1.22768, The 2021 high at 1.23490 serves as an additional target to the north.