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Correction May Sustain Bearish Momentum Toward Key Support
Central Bank
Economic
Summary:
EUR/USD has entered a corrective phase after reaching a local high of 1.1572 on April 21, since then, the pair has struggled to make new highs and instead formed a series of lower lows.
Sell
CLOSEDEURUSD
End Time
1.11857
Entry Price
1.09520
TP
1.14000
SL
1.13465 -0.00112 -0.10%
304
Points
Profit
1.09520
TP
1.11553
CLOSING
1.11857
Entry Price
1.14000
SL
Retail sales data for April showed a modest increase of just 0.1%, beating market expectations but falling well short of the 1.5% rise seen in the previous month. This marks a potential turning point, indicating that U.S. consumers may be starting to pull back on spending. At the same time, the Producer Price Index (PPI) fell by 0.5% on a monthly basis, signaling further easing of inflationary pressures at the wholesale level. Together, these figures raise concerns about underlying demand and reinforce the view that inflation may be cooling more rapidly than previously anticipated.
Meanwhile, Federal Reserve Chair Jerome Powell, speaking alongside Fed strategist Thomas Laubach, reiterated the importance of reassessing the Fed’s communication framework on inflation and employment. The market response to Powell’s remarks was muted, with investors shifting their focus toward potential currency interventions in Asia and the deteriorating tone of negotiations between Russia and Ukraine.
Signs of cooling inflation were further confirmed by the latest Consumer Price Index (CPI) figures. Both headline and core CPI rose by just 0.2% in April, coming in below consensus forecasts of a 0.3% monthly increase. On an annual basis, core inflation—which excludes volatile food and energy prices—remained steady at 2.8%, showing little momentum toward renewed price acceleration.
This softer inflation print has once again drawn market attention to the Federal Reserve’s next moves. While a rate cut in the immediate term remains unlikely, the latest data has fueled speculation that policy easing may be on the horizon. According to the CME FedWatch tool, the probability of a rate cut at the June 18 meeting remains low at just 8.2%, but this rises to 38.6% for July and jumps to 77.1% for September—suggesting that investors expect easing to begin in the second half of the year.
Still, cautionary voices persist. Chicago Fed President Austan Goolsbee warned that even existing tariffs could continue to place upward pressure on prices. Analysts at Deutsche Bank added that any softening in U.S.-China trade tensions is unlikely to trigger a meaningful shift in the Fed’s current policy stance.
Across the Atlantic, European Central Bank (ECB) policymaker and Governor of the Bank of France François Villeroy de Galhau stated on Wednesday that protectionist policies announced by the Trump administration are likely to reignite inflation in the U.S., not in Europe—setting the stage for a potential ECB rate cut by summer. Looking ahead, the main driver for the euro remains the stalled trade negotiations between the European Union and the United States.
During European trading hours, German Finance Minister Lars Klingbeil addressed parliament, stating that the EU is fully prepared with countermeasures should the talks with Washington collapse. However, he emphasized that Europe’s priority remains reaching an agreement with the U.S. “We hope the negotiations yield a positive outcome,” Klingbeil said, adding, “We must respond to U.S. tariffs with unity and resolve.”
Meanwhile, revised Eurozone GDP data for the first quarter showed the economy expanding at a slightly slower pace of 0.3%, compared to the initial estimate and previous reading of 0.4%. On a year-over-year basis, growth held steady at 1.2%, in line with forecasts. Employment data also improved, with job growth rising 0.3% quarter-over-quarter from January to March, up from a preliminary reading of 0.1%.
Technical Analysis
EUR/USD has entered a corrective phase after reaching a local high of 1.1572 on April 21. Since then, the pair has struggled to make new highs and instead formed a series of lower lows. Moreover, the price has closed decisively below the 100- and 200-period moving averages—currently positioned at 1.1294 and 1.1232, respectively—suggesting the correction could deepen further, with potential downside targets near the 1.0952 level.
The Relative Strength Index (RSI) has failed to break above the 56 mark. While this level is typically viewed as neutral, in the context of a corrective move, it has previously marked turning points for renewed selling pressure. Should this pattern hold, sellers may re-enter from this region. On the flip side, a new higher high would invalidate the current bearish setup and could fuel further upside momentum.
Trading Recommendations
Trading direction: Sell
Entry price: 1.1185
Target price: 1.0952
Stop loss: 1.1400
Validity: May 23, 2025 15:00:00
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