After a week of gains, the EUR/USD exchange rate is expected to be more resilient against further weakness, thanks to positive German economic data. A key German survey indicated that the economy may have overcome a challenging phase, boosting confidence in the euro.
The EUR/USD exchange rate has been rebounding towards the resistance level of 1.0715, settling around 1.0685 at the time of writing. Analysts believe that the exchange rate is poised for further strength rather than a return to a broader downtrend.
Carsten Brzeski, an analyst at ING Bank, commented on the April Ifo index results, stating that Germany appears to be at a turning point in its economic cycle. The Ifo data showed improvements in both current assessment and expectations, indicating a potential shift in the economy.
Forex trading platforms have seen a recovery in the EUR/USD exchange rate this week, with German economic data providing support for technical levels. Analysts suggest that Euro short sellers may find additional support in the market.
Renewed optimism about the German economy has led to an increase in the yield on 10-year German bonds, narrowing the yield gap between US Treasury bonds and German bonds. This change in expectations about monetary policy is expected to limit the impact of rising US yields on the euro.
Despite facing pressure in April, the euro has shown resilience against the US dollar, with the exchange rate reaching a low of 1.0601. However, any slowdown in US bond yields and a rise in Eurozone bond yields could support the euro against the dollar.
ING Bank predicts that Germany could have emerged from recession earlier than expected, citing strong activity in the construction sector and a recovery in commercial and industrial production. The bank expects this cyclical recovery to continue in the second quarter.
The EUR/USD currency pair has been trading above the 100-hour moving average line, indicating potential for movement in either direction. In the short term, the currency pair appears to be trading within a sideways channel, with potential targets for both bulls and bears.
On the daily chart, the EUR/USD currency pair is trading within a descending channel, but the recent rebound in the 14-day RSI suggests potential for extended bounce profits. Both bulls and bears have specific targets in mind for potential profits.
Overall, the positive German economic data and the rebound in the EUR/USD exchange rate indicate a more stable outlook for the euro in the near future.