In our previous EUR/USD technical analysis, we stated for the bullish trend to continue, the European currency must close and stabilize the price above the robust barrier of $1.083. That barrier was blasted on May 15, making a new higher low at $1.089.
Inflation Worries Grow with Eurozone Wage Increase
The first quarterly wage negotiation in the Eurozone resulted in a surge of 4.69%, up from 4.45% in the previous period. These new wages increased concerns of higher inflation, which can increase the prices of goods, services, and foods. With higher inflation and prices, the European Central Bank (ECB) might refrain from lowering interest rates.
This outlook attracted investors to increase their bids on the Euro. Higher inflation usually results in the central banks increasing the interest rates.
EUR/USD Technical Analysis 4-Hour Chart
FxNews—The currency pair in discussion tested the broken descending trendline at $1.081 this week. The bulls maintained the price above the broken trendline, and as a result, the Euro pulled back, trading at about $1.084 in the current trading session.
The 4-hour chart above shows the EUR/USD currency pair ranges inside the bullish flag, stabilizing above EMA 50 and Ichimoku Cloud. Interestingly, the technical indicators align with today’s momentum.
The awesome oscillator bars have just turned green, and their value has increased to -0.002. The relative strength index (RSI 14) value shows 53, hovering above the median line. The stochastic oscillator also demonstrates bullish momentum, trending with the %K value 32.
These developments in the technical indicators in the 4-hour chart suggest the primary bullish trend will likely resume.
EURUSD Aims for $1.097 After Breakout
From a technical standpoint, if the European currency maintains the exchange rate about the ascending trendline, the next bullish target could be the May 16 high at $1.089. Further push could result in a new break out from the key resistance ($1.089). If this scenario comes into play, the EUR/USD price can rise to $1.097 with ease.
The bullish scenario remains intact as long as the exchange rate exceeds the immediate support at $1.081.
The Bearish Scenario
Conversely, if the EUR/USD price dips below the immediate support at $1.081, the downtrend momentum begun on May 16 could expand and initially target 38.2% Fibonacci at $1.078. If the selling pressure continues, the secondary target could be $1.074.