Key Moments
- EUR/USD trades near 1.1370 in early European dealings as markets position for potential Federal Reserve tightening.
- May US headline PCE is forecast to rise 4.1% YoY and core PCE 3.4% YoY, with stronger readings seen as supportive for the USD.
- EUR/USD remains below its 20-day Bollinger middle band and 100-day moving average, keeping the broader bias negative despite the latest bounce.
EUR/USD Holds Above 1.1350 Ahead of US PCE Data
The EUR/USD pair is trading in positive territory around 1.1370 in the early European session on Thursday, stabilizing above the 1.1350 area after recent weakness. Market participants are reacting to a unexpectedly hawkish tone from Kevin Warsh as the new Federal Reserve (Fed) chair last week, which has led traders to factor in the possibility of a US interest rate increase as soon as September.
Investor attention is expected to shift later in the day toward the upcoming US Personal Consumption Expenditures (PCE) data, a key inflation gauge that could shape expectations for future Fed policy. The approach of this release may encourage more cautious positioning in both the Euro (EUR) and the US Dollar (USD).
US PCE Inflation Expectations and Dollar Implications
Consensus projections point to an acceleration in inflation pressures for May. The headline PCE index is anticipated to show a 4.1% year-over-year increase, compared with 3.8% previously. The core PCE measure, which excludes more volatile components, is expected to rise 3.4% year-over-year, versus 3.3% in April.
Stronger-than-forecast PCE readings would likely reinforce the case for additional US interest rate hikes later this year. Such an outcome could provide fresh support for the USD and weigh on EUR/USD, particularly given the pair’s already fragile technical backdrop.
| Indicator | Period | Expected YoY | Previous YoY |
|---|---|---|---|
| Headline PCE | May | 4.1% | 3.8% |
| Core PCE | May | 3.4% | 3.3% (April) |
Technical Picture: Bearish Bias Intact Despite Minor Recovery
On the daily chart, EUR/USD continues to trade below the 20-day Bollinger simple moving average and remains firmly under the 100-day moving average. This configuration maintains a clearly bearish broader trend, even as the pair attempts to recover above 1.1350.
Spot prices are hovering just above the lower Bollinger Band support at 1.1351. The 14-period Relative Strength Index (RSI) has dropped to 28.3, sliding into oversold territory. This signals stretched downside conditions, but does not yet provide a definitive indication of a sustained bullish reversal.
Key Support and Resistance Levels
On the downside, initial support sits near the lower Bollinger Band around 1.1350. A decisive break below this area would expose further weakness toward the 1.1300 psychological level, leaving EUR/USD vulnerable to an extension of the prevailing downtrend.
On the upside, the first notable resistance is located at the March 13 low of 1.1411. Above that, attention turns to the 20-day Bollinger middle band around 1.1530 and then the 100-day moving average at 1.1650. Only a recovery through this entire resistance band would begin to relieve the current bearish pressure on the pair.
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