According to flash estimates, the EU consumer inflation leapt to 7.5% in March from 5.9% in February. The revised data was expected to match the preliminary one. The revised CPI jumped to 7.4% on the year, slightly lower than projected.
Though the actual growth was a tick lower amid dismal macroeconomic data on the EU economy, market participants welcomed the news that triggered a notable rally of the single European currency.
In the early New York session, EUR/USD sharply reversed in the opposite direction. The currency pair dropped to the previous levels in light of the weekly update on US unemployment claims. Initial claims for unemployment benefits went down just by 2K last week, whereas economists had projected a 6K contraction.
Continuing jobless claims dropped by 58K, much more than the expected decrease of 15K. Overall, overall unemployment claims fell to a larger degree than in the consensus. The data proved that the US labor market is getting back on track.
The EU manufacturing PMI slipped to 55.3 from 56.5. The EU services PMI rose to 57.7 from 55.6. As a result, the EU composite PMI rose to 55.8 from 54.9.
For the US, the manufacturing PMI is projected to fall to 58.0 from 58.8. The services PMI could have dropped to 57.0 from 58.0.
Such contraction in business activity should have pushed the US composite PMI down to 57.0 from 57.7. In response, the US dollar could weaken for a while. Thus, EUR/USD will return to the levels where it was trading before the EU PMIs.
EUR/USD ended its upward retracement at 1.0935, where traders abruptly cut on long positions. Therefore, market sentiment changed, which pushed the price down to 1.0800.
The H4 RSI technical instrument reached the overbought zone during the upward retracement. It confirmed that the market was overheated with long positions. The same signal was detected on the chart when the price reversed its trajectory. The D1 RSI does not display the retracement stage, moving in the lower zone of 30/50.
The H4 Alligator changed its direction for a while. Currently, moving averages are being interlaced. It means that the currency pair is slowing down its retracement. As before, the D1 Alligator signals a medium-term downtrend.
Outlook and trading tips
At the moment, we need to find some evidence that the retracement stage is over. We will have such evidence when the price settles below 1.0800. The clear-cut sell signal for EUR/USD will be generated when the price settles below 1.0750 on the 4-hour chart. Until then, the currency pair might get stuck in a trading range or resume a retracement.
Complex indicator analysis provides mixed signals for short-term and intraday trading because the price moves slower during the retracement stage. Technical indicators suggest selling in the medium term as EUR/USD moves at the downtrend channel's lower border.
