The EUR/USD pair has diminished its losses, currently trading in the 1.1760 area after bouncing back from session lows around 1.1730. In March, German Producer prices experienced their fastest increase in nearly four years. The Euro remains limited below a previous support level around 1.1770. The Euro has reversed earlier declines against the US Dollar after a sluggish start to the week, as escalating tensions between the US and Iran have dampened expectations for a quick resolution to the conflict. The pair has pulled back to the 1.1760 zone after hitting daily lows below 1.1730, but upward movements remain limited beneath the lows seen at the end of last week, near the 1.1770 level.
Investor sentiment remains cautious, with market participants seeking updates from the Middle East after the US authorities seized an Iranian vessel, further undermining an already fragile ceasefire. Iranian authorities have suggested possible retaliation and have created ambiguity regarding their participation in the peace talks scheduled to resume on Tuesday. In Europe, the German Producer Price Index data has shown a 2.5% monthly increase in March, representing its strongest reading since August 2022, thus highlighting the upward risks for inflation associated with the ongoing conflict in Iran.
The recent figures indicate strong wholesale prices and high consumer inflation rates reported in several EU countries last week, heightening the pressure on the European Central Bank to contemplate raising interest rates soon. The currency pair is currently positioned just above 1.1750, encountering resistance from a prior support level near 1.1770, which is limiting upward movement for the bulls at this time. The technical indicators on the 4-hour chart suggest a downward trend. The Relative Strength Index has dropped to around 45, suggesting a decline in bullish momentum after the recent pullback. Meanwhile, the negative values in the histogram suggest that directional pressure is still slightly tilted towards the downside.
Downside attempts remain constrained above the previous highs, which span from 1.1720 to 1.1740, thereby maintaining a pathway towards the essential support area located between the April 13 low at 1.1680 and the support trendline from the late March lows, presently situated at 1.1660. On the topside, initial resistance is identified at the previously mentioned 1.1770 area, corresponding to the lows from April 15 and 16. A breach of that level indicates the April 16 highs at 1.1825 and then 1.1850.