As markets brace for high-impact U.S. economic data—namely the University of Michigan's preliminary readings on consumer sentiment and inflation expectations—EURUSD remains under pressure amid shifting macro and technical dynamics. A combination of softer U.S. data and fading Fed rate-cut optimism has weighed on the dollar, while the euro faces its own headwinds as the ECB flags mounting risks from global trade tensions and fiscal constraints. With both currencies influenced by divergent but uncertain outlooks, traders are closely watching for confirmation of near-term direction as key support and resistance levels come into focus.
Overview
As markets brace for high-impact U.S. economic data—namely the University of Michigan's preliminary readings on consumer sentiment and inflation expectations—EURUSD remains under pressure amid shifting macro and technical dynamics. A combination of softer U.S. data and fading Fed rate-cut optimism has weighed on the dollar, while the euro faces its own headwinds as the ECB flags mounting risks from global trade tensions and fiscal constraints. With both currencies influenced by divergent but uncertain outlooks, traders are closely watching for confirmation of near-term direction as key support and resistance levels come into focus.
Key Economic Events
Friday 17:00 (GMT+3) – USA: Prelim UoM Consumer Sentiment (USD)
Friday 17:00 (GMT+3) – USA: Prelim UoM Inflation Expectations (USD)
Technical Analysis
Since peaking at 1.15729 on April 21, EURUSD has entered a clear downward trajectory, marking a decisive shift from prior bullish momentum to a bearish reversal. The breakdown below key support at 1.13076 confirmed a change in market structure, highlighting increasing downside pressure.
From a technical standpoint, the pair remains trading below the 20-period Exponential Moving Average (EMA), a development that reinforces short-term weakness. While the 50-period EMA is still acting as tentative support, the absence of a bearish crossover—where the 20-period EMA would move below the 50-period EMA—suggests that confirmation of a longer-term downtrend is still pending.
Momentum indicators continue to support the bearish outlook. The Momentum Oscillator remains firmly below the 100 baseline, signaling negative momentum, while the Relative Strength Index (RSI) holds below the neutral 50 threshold, reflecting persistent selling interest.
Unless near-term price action stabilizes above key resistance levels, the technical backdrop favors continued downside in the sessions ahead.
Potential Upside Targets
Should the bulls take market control, traders may direct their attention toward the four potential resistance levels below:
1.12747: The first price target is observed at 1.12747, representing the weekly Pivot Point, PP, estimated using the standard methodology.
1.14245: The next price objective is seen at 1.14245, mirroring the peak from April 28.
1.15729: Similarly, the third target is projected at 1.15729, corresponding to the high point marked April 21.
1.18116: An additional price target is estimated at 1.18116, representing the 261.8% Fibonacci Extension drawn from 1.14731 to 1.12639.
Potential Downside Targets
If the sellers maintain market control, then traders may consider the following targets:
1.10649: The first price target is observed at 1.10649, representing a daily low from May 12.
1.09293: The next price objective is seen at 1.09293, corresponding to the 423.6% Fibonacci Extension drawn from 1.13076 to 1.14245.
1.07326: The third downward target is observed at 1.07326, corresponding to the trough from March 26.
1.05283: An additional support level is noted at 1.05283, reflecting a peak from February 26.
Fundamentals
The U.S. dollar weakened on Thursday following mixed economic data that highlighted signs of consumer softness. Retail sales rose just 0.1% in April, well below March's upwardly revised 1.7% surge, while producer prices posted their steepest drop in five years, falling 0.5%.
Lingering uncertainty over trade policy and its broader economic impact, despite a temporary easing of U.S.-China tariffs, has led markets to push back expectations for Federal Reserve rate cuts to September. The dollar index dipped 0.11% to 100.89, while analysts pointed to both tariff effects and broader consumer weakness as potential drags on near-term growth.
On the other hand, ECB's Vice President Luis de Guindos highlighted a global trade war, financial market volatility, and high debt levels as the top risks to the euro zone economy ahead of the ECB's Financial Stability Review due May 21.
Despite resilience in the face of recent U.S. tariffs, de Guindos warned that persistent trade tensions, elevated geopolitical uncertainty, and compressed credit spreads could lead investors to underestimate downside risks. He also noted that rising defense spending and structural challenges like climate change and digitalization could further strain already limited fiscal space.
Conclusion
With EURUSD trading under sustained pressure, both technical and fundamental signals currently favor a bearish bias. Weak U.S. economic data has softened the dollar slightly, but uncertainty over the Fed's next move and lingering global trade risks continue to weigh on sentiment across both currencies. Meanwhile, the euro faces additional headwinds from structural concerns within the euro zone and cautious commentary from the ECB. Unless there is a substantial shift in policy expectations or economic momentum, downside risk remains elevated, with key support levels likely to be tested in the near term.