• The Euro traded at its lowest point in three weeks, falling below the significant mark of $1.1, which was achieved over a year ago.

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• Investors are analyzing recent inflation reports from the US and China, seeking to interpret their implications.
• The Euro received a boost as the US inflation rate slowed down more than expected, raising hopes of a narrower interest rate gap between the US and the Euro Area.
• However, concerns about global growth arose due to the lack of inflation in China, leading some investors to seek safer currencies like the DXY.
• Policymakers in the Euro Area are expected to continue raising interest rates until summer due to high inflation levels.
• On the other hand, the US Federal Reserve is likely to pause its tightening cycle temporarily.

The euro currency finds itself in a state of mixed fundamentals, influenced by contrasting factors such as declining inflation in China and the potential pause in the US tightening cycle. This has resulted in a complex viewpoint for the euro, while its daily interval shows a downward trend over the past seven days, with a possible target set on the Year’s developing Volume-Weighted Average Price (VWAP).

The likelihood of stimulus in China holds the potential to bolster both the dollar and the euro. Furthermore, the European Central Bank’s anticipated interest rate increases could narrow the rate gap between the ECB and the US Federal Reserve, thereby lending support to the EUR/USD exchange rate, commonly referred to as the “fiber rate.”

Present internal calculations indicate an upside trajectory at the moment, as buyers emerge for euro long positions around previous swing lows observed in early April. However, the rate is currently trading below the value area of both the Quarter and the Month, which may exert pressure. Additionally, it remains considerably distant from the VWAPs, thereby increasing the probability of a pullback towards this particular level from a technical standpoint.

In today’s market structure, there is a potential focus on the prior VWAP close level around $1.09, where euro short positions and dollar long positions may be sought. Meanwhile, the developing VWAP can serve as a reference level to augment core euro long positions.

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