EUR/USD Hits Highest Level in a Year After U.S. Data

The EUR/USD has managed to maintain its upward momentum, holding above the critical psychological level of 1.1000. The euro rose for a third straight day on Thursday amid reports suggesting that the European Central Bank (ECB) policymakers are in agreement regarding a potential 25 basis point rate hike in May. Meanwhile, the U.S. dollar continued to weaken following lower-than-expected wholesale inflation numbers.

At the time of writing, the EUR/USD pair is trading at 1.1045, 0.5% above its opening price, after hitting its highest level in a year at 1.1067.

On Thursday, the U.S. reported Producer Price Index (PPI) and jobless claims data. The annual wholesale inflation, measured by the PPI, came in at 2.7% in March, below expectations of 3%, while the core rate was 3.4% in the same period, in line with consensus. In addition, initial jobless claims data for the week that ended April 8 rose to 239,000 versus the 232,000 expected.

The greenback fell across the board as softer inflation and job numbers have fueled expectations the Federal Reserve will hike one more time and then take a pause. According to the WIRP tool, investors are betting on probabilities of 67% of a 25 bps hike in May that would take the Fed funds range to 5.00%-5.25%. In addition, markets are now discounting higher probabilities of the FOMC cutting rates by the year-end.

From a technical perspective, the EUR/USD maintains a short-term bullish outlook as per indicators on the daily chart. The RSI and MACD are both in positive territory, not yet tagging overbought levels, while the price remains above its main moving averages, suggesting the buyers have the upper hand.

On the upside, a break above 1.1070 would pave the way for more gains, targeting the 1.1100 area and the critical 200-week SMA at 1.1199. A break above this level would improve the longer-term perspective. On the downside, the 1.1000 level stands as the immediate support level, followed by the 1.0950 and 1.0900 areas.