EUR/USD Pullback Imminent? RSI Overb.Central Bank Hikes Expected

The EUR/USD currency pair, as previously mentioned, is currently experiencing a strong bullish trend. In order to sustain this upward momentum, it is necessary for the price to undergo a pullback or retracement, which would reinforce the strength of the trend and potentially lead to a new bullish impulse. Currently, the Relative Strength Index (RSI) indicates that the market is in an overbought area, further supporting the idea of a pullback.

At present, the EUR/USD pair is trading around the 1.0910 price level, registering minor losses on a relatively quiet Monday. Following the flurry of activity from central banks during the previous week, speculative traders have become more optimistic. The proximity of the end of the tightening cycle offers reassurance against potential recessions, while inflation has gradually eased from the record highs reached in mid-2022.

Although the US Dollar has gained ground due to position adjustments after last week's sell-off, its overall intrinsic weakness persists due to the ongoing preference for riskier assets among investors.

On Monday, the macroeconomic calendar in the Eurozone provided little noteworthy data, but members of the European Central Bank (ECB) made significant statements, thereby maintaining high anticipation for potential rate hikes. Philip R. Lane, an Executive Board Member, expressed the view that another rate hike in July appears appropriate, while the decision in September will depend on upcoming data. In the meantime, Isabel Schnabel voiced concerns about the central bank's underestimation of inflation in the past, suggesting that the interest rate trajectory should have been steeper. She hinted at the possibility of further rate hikes later this year.

Looking ahead to Tuesday, the European Union (EU) is scheduled to release the April Current Account and Construction Output data, while the United States will publish May Building Permits and Housing Starts figures. It is worth noting that Federal Reserve (Fed) Chairman Jerome Powell is set to testify before Congress on Wednesday, potentially offering fresh insights into the future course of monetary policy.