EUR - Dollar falls, euro surges higher

U.S. consumer confidence deteriorated sharply in April, one-year inflation expectations surged to the highest since 1981 and jitters about escalating trade tensions have roiled financial markets and raised the risk of a recession. The University of Michigan Consumer Survey showed that the consumer confidence index fell to $50.8, the lowest since June 2022, and the forecast was $54.5. One-year inflation expectations rose to 6.7%, marking the fourth consecutive month of increases of 0.5 percentage points or more. Five-year inflation expectations rose to 4.4 percent, the highest since June 1991. Other data showed that the final demand producer price index (PPI) fell 0.4% month-on-month in March, the first decline since October 2023, and was expected to rise 0.2%; the year-on-year increase in PPI in March fell to 2.7%. After the data was released, the interest rate futures market believed that the probability of the Federal Reserve cutting interest rates in June fell to about 75%, and believed that there would be a total of three rate cuts this year, and bets on a fourth rate cut were reduced.

The euro fell and then surged against the U.S. dollar last week, soaring above the 1.1470 level on Friday, and then narrowed its gains and returned to around the 1.1360 level in late trading. The global turmoil unleashed by Trump's tariffs has bolstered the case for another rate cut at the European Central Bank's meeting this week and bolstered views that the central bank will ease policy more quickly. From the technical chart, we can see that the RSI and stochastic index are recovering from the oversold area, and the exchange rate can still hold the 25-day moving average. It is expected that the euro will continue to stabilize against the U.S. dollar. The resistance level will return to 1.15 and 1.1620 levels, and the next level will be 1.17 and 1.18 levels. The supporting level is expected to be 1.1320 and 1.1180, and the next level will be 1.11 and 1.10. The key level is still the 25-day moving average of 1.09.

Forecast range:
Resistance 1.1500 – 1.1620 - 1.1700 – 1.1800
Support 1.1320 – 1.1180 – 1.1100 - 1.1000 – 1.0900*

Focus:
Tuesday: Eurozone February industrial production (17:00)
Germany's April ZEW Economic Sentiment Index (17:00)

Wednesday: Eurozone March HICP final value (17:00)

Friday: ECB interest rate decision (20:15)

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