EUR/USD increased for the third consecutive day on dollar weakness after the expected Fed boosts rate by 25 basis points.
Federal Reserve Chairman Jerome Powell also warned that the central bank could put on hold its rate hike to gauge the impact of the steepest rate boost cycle since the 1970s on the economy, especially the banking sector, which is exhibiting increasing signs of tensions. PacWest Bancorp struggled overnight, underlining the weak health of the sector. Concerns about the debt ceiling are also weighing heavily on the US dollar.
The focus is on the ECB Today, which will discuss a 25 and 50-basis point rate boost. The market had expected the ECB to boost interest rates by 25 basis points to 3.25% after core inflation slowed to 5.6% for the first time in 10 months and credit conditions cooled. However, with wage growth still well above the central bank’s 2% target and wage growth still accelerating, a 50-basis point boost cannot be ignored.
EUR/USD Technical Analysis
EUR/USD keeps climbing higher by 20 SMA. Buyers need to increase above 1.1095, 2023 high, and 1.1115 up trendline support to extend the uptrend to the 1.1185 March 2022 high.
Sellers may be encouraged by the bearish RSI divergence, which suggests the rally is losing momentum.
The DAX targets a lower open after gaining 0.56% in the previous session and falling overnight on Wall Street.
Investors are careful after the Fed boosted rates to between 5% and 5.25% and ahead of the ECB’s decision, which is expected to see the central bank hike rates for the seventh consecutive month.
Along with the ECB interest rate decision, the final composite PMI for Germany should confirm the 53.9 flash reading from 52.6 in March.
Meanwhile, the eurozone PPI data is meant to fall sharply to 5.9% from 13.2% in February.
Today is also a busy day in the company calendar. BMW, Volkswagen, and Infineon are big names in the DAX that should deliver strong results.
DAX Technical Analysis
The DAX is trading in a rising wedge. The price met resistance at 16011 and returned to support at the 20 SMA, which is currently testing. If the bulls defend the 20-SMA, the price could retest 16011 for the 2023 high.