EUR/USD Declines on Dovish ECB Comments, Rebounding on Lagarde's Remarks
EUR/USD sank into the 1.0640s after Banque de France head and ECB policymaker Francois Villeroy de Galhau indicated a potential rate cut at the ECB's May meeting. This dovish stance, suggesting the ECB might act sooner than the anticipated June cut, weighs on the Euro.
Key Factors:
- Dovish ECB Signal: De Galhau's comments raise concerns of an ECB slowdown and earlier-than-expected rate cuts, diminishing the Euro's appeal.
- Lagarde's Remarks: ECB President Christine Lagarde's acknowledgement of slow Eurozone growth momentarily boosted the EUR/USD before the dovish ECB comments.
- US Rate Outlook: Sustained talks about higher US interest rates for a longer period continue to pressure EUR/USD.
Recent Market Dynamics:
- April Decline: EUR/USD plummeted earlier this month as expectations for a June Fed rate cut faded due to persistent inflation and strong US data.
- Fed Beige Book: The Fed's Beige Book reinforced the view of high rates persisting until inflation is contained.
Technical Analysis:
- Short-Term Rebound: EUR/USD rebounded from a low at 1.0601, demonstrating potential for a brief recovery.
- Ongoing Downtrend: The broader downtrend likely remains intact, presenting a risk of further declines.
- Resistance at 1.0700: The nearby resistance level could hinder the recovery, inviting renewed bearish pressure.
- Key Target: A break below the 1.0601 April low would signal a bearish continuation, targeting the October 2023 low at 1.0446.