The EUR/USD exchange rate remained in a narrow range on Friday, even after the extreme busy week in which the Federal Reserve and the European Central Bank (ECB) delivered their interest rate decisions. It ended the week at 1.1720, a few points below last month's high of 1.1855.
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ECB and Federal Reserve Interest Rate Decisions
The EUR/USD pair moved sideways after the Federal Reserve and the European Central Bank (ECB) interest rate decisions. In its decision, as was widely expected, the bank left interest rates unchanged between 3.50% and 3.75%.
Officials also delivered a relatively dovish statement that hinted that they will cut rates later this year if the US economy slows substantially.
The pair also reacted to the latest US GDP and inflation report. According to the Bureau of Economic Analysis, the economy expanded by 2.0% in the first quarter, a big improvement from the previous 0.5%.
Another report showed that the headline and core PCE inflation figures rose 3.5% and 3.2% in March, moving further away from the Federal Reserve’s target of 2.0%.
The European Central Bank (ECB) delivered a more hawkish tone in which officials hinted that they may hike interest rates in the June meeting. Officials pointed to the elevated inflation, which has jumped in the past few weeks because of the Iranian war.
Looking ahead, the pair will react to the upcoming statement by Christine Lagarde, the head of the ECB. Also, S&P Global will publish the final manufacturing and services PMI numbers, while the Bureau of Labor Statistics (BLS) will publish the latest US non-farm payrolls (NFP) data.
Economists expect the upcoming report to show that the economy added over 73k jobs in April from the previous 178k jobs. The unemployment rate is expected to come in at 4.3%.
EUR/USD Technical Analysis
The weekly chart shows that the EUR/USD pair has removed in a narrow range in the past few days. After soaring to 1.1855 in April, it pulled back to the current 1.1720.
The pair has moved above the 50-week and 100-week Exponential Moving Averages (EMA). It is also in the process of forming a bullish flag pattern, which is made up of a vertical line and a descending channel.
Therefore, the pair will likely have a strong bullish breakout because of the ongoing Federal Reserve and ECB divergence. The first key target to watch will be at 1.1855. A move above that level will point to more gains, potentially to 1.2000.
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