The EUR/USD pair broke below the 1.0500 mark and hit a fresh five-year low on Thursday as the U.S. dollar continued to outperform its peers on expectations the Federal Reserve would hike rates more aggressively in upcoming meetings.
The pair bottomed out at 1.0470 but briefly climbed back above the 1.0500 psychological level after the U.S. reported an unexpected economic contraction during the first quarter. The GDP fell 1.4% in Q1 2022, well below expectations of a 1.1% increase, weakening the dollar.
In case of persistent weakness in U.S. indicators, the Fed’s determination to raise rates more quickly could be challenged, which would weigh on the greenback.
Meanwhile, Germany reported a 7.4% annualized consumer inflation rate in April, slightly above the forecast of 7.2%. Increasing inflation rates in the Eurozone adds pressure on the European Central Bank to begin its monetary tightening cycle.
From a technical perspective, the EUR/USD maintains a bearish short-term bias, according to the daily chart. However, the RSI remains in oversold territory, favoring a pause following six consecutive days of heavy losses and lower lows.
The 1.0620 area stands as immediate resistance, followed by the former support now turned to resistance at 1.0757. A break above this level could allow a test of the 20-day SMA, currently around 1.0810.
On the other hand, loss of the 1.0470 area would expose 2017 yearly low at 1.0340, with interim support seen at the 1.0400 area.
