EUR/USD has managed to hold a narrow range in spite of an unexpected uptick in the German Industrial Production. However, the rebound that came up after the Federal Reserve meeting may start to cause an impact on the pair. The impact may increase if fresh data from the US economy point towards a diminishing threat for below-target inflation.
The updates to the United States Consumer Price Index (CPI) may change the short-term outlook for the dollar considerably. The headline and core reading are anticipated to rise in April. Any signs of sticky price growth may compel the Federal Open Market Committee (FOMC) to introduce a rate-hike in this year.
The rate hike is possible since the incoming data after the last FOMC meeting in March has fulfilled expectations. Nonetheless, it remains to be seen whether the FOMC chairman Jerome Powell and Company will continue to forecast a long-term interest rate of 2.50% to 2.75%. The FED officials will update the Summary of Economic Projections (SEP) in June 2019.
It is worth noting that the Fed Fund Futures still show an over 50% probability for a rate cut. The FOMC intends to taper the $50B/month in quantitative tightening (QT). Nevertheless, little to no signs for a regime change may enhance the appeal of the USD. Also, the baseline view remains that, with continued economic growth and a strong job market, inflation will return to 2% eventually.
On the other hand, a material uptick in the headline and core CPI may result in a bullish reaction in the US dollar. The monthly opening range is the primary focus for EUR/USD as the exchange rate seems to be trapped within a tight margin.
EUR/USD Rate Daily Chart
The wider outlook for this currency pair remains pointed to the south. Both the Relative Strength Index (RSI) and price continue to align to the bearish formations from earlier in the year. The short-term outlook features several failed trials to push back up and above the Fibonacci overlap pegged around 1.1270 (50% expansion) to the 1.1290 (61.8% expansion) level.
Lack of momentum to hold the EUR/USD pair above the 1.1190 (38.2% retracement) to 1.1220 (78.6% retracement) zone increases the risk for a move towards 1.1140 (78.6% expansion). The nearest support level after that formed at the 1.1100 (78.6% expansion) handle followed by the 1.1040 (61.8% expansion) region.