Pressure has been building for the EUR/USD price to break above the 1.2243 resistance level. So far, it has failed, but it may only be a matter of time.
The Euro has been trading well against the dollar over the last two months. However, this is as much to do with the greenback’s weakness as it does with the strength of the Euro.
Both economies are faced with a similar dilemma. Economic data on both sides of the pond has generally improved. Similarly, there are also concerns about inflation data, both in the Eurozone and the U.S. Despite this, the EUR/USD price has continued to trend higher.
On the 25th of February, The currency pair was trading at $1.2243. In the following six weeks, the Euro lost 4.37% and by the end of March was $1.1702.
Whilst the recent US inflation data was much higher than expected. The poor jobs numbers that followed seem to have put to bed any chance of the Federal Reserve tightening monetary policy any time soon.
Fed Chairman Powell reinforced this view, saying:
“It seems unlikely, frankly, that we would see inflation moving up in a persistent way that would actually move inflation expectations up while there was still significant slack in the labor market,”
The resulting dollar weakness sent the EUR/USD price back to the February high at $1.2243.
Severals attempts over the last week to clear the level have failed, and the price is currently back to $1.2187.
So what happens now?
EUR/USD Technical Outlook
The daily chart shows the strong uptrend the pair has traded in from the March low. This trend is currently supporting the price at $1.2110. A failure to hold this level could result in an extension lower to the 50-day moving average at $1.2042.
If the price can clear the horizontal resistance at $1.2245, it could provide a buying opportunity. An obvious target for bulls would be the January high at $1.2350.
Stops should then be placed below the previous resistance at $1.2243 as protection against a false breakout.