EUR/USD Rises To Fresh 1-Year High, Breaks Above 1.10 As Dollar Downtrend Rages On

The EUR/USD pair pushed to its freshest highs in over a year, extending over 1.1050 on Thursday as the release of a falling producer price index inflation data point and rising unemployment claims in the U.S. sparked intense selling pressure in the greenback. 

The Invesco CurrencyShares Euro Currency Trust (ARCA: FXE), which tracks the performance of the euro-dollar pair, rose 0.7% on the day. 

The world's most-traded currency pair is on track to post its seventh consecutive week of gains, which hasn't occurred since the summer of 2020.

Disappointing data in the United States has caused investors to lower their expectations for more Fed policy rises following the one in May, and they now factor in a rate cut as soon as July.

The yield on the U.S. two-year Treasury note, a proxy for the expectations on the Fed funds rate in the near future, dropped by 5 basis points to 3.92%.

EUR/USD Technical Analysis: Bulls Now Target 1.12

After breaking the 1.10 psychological threshold, bulls now encounter the next resistance at 1.1182 (March 2022 highs), followed by the 1.12 mark, which also corresponds to the key 200-week moving average.

So far EUR/USD has retraced more than half of the 2021-2022 low-to-high range. The next key Fibonacci level is now at 1.127, which represents the 61.8% retracement of the previously mentioned range. 

The 14-week RSI has risen to 69, indicating that technical overbought conditions are emerging. The last time the EUR/USD reached overbought levels on the 14-week RSI was in January 2018, which may warrant some cautioun in chasing short-term gains. 

The Last Word: Overall, the stars appear to be aligning for the EUR/USD to test the 200-week moving average at 1.12 before the next Fed meeting in May.

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