EUR/USD might extend its recent decline due to diverging economic indicators from the U.S. and the euro area, along with bearish technical signals. The euro zone's first-quarter GDP growth was dismal at just 0.1%, while March industrial output fell short of expectations, declining 2.1% year-on-year. In contrast, the U.S. reported a significant uptick in April producer prices, marking the largest gains in four years, alongside recent jobs data suggesting a resilient labor market.

This divergence in economic performance could lead market participants to expect the Fed to choose a more hawkish policy direction and the ECB to adopt a more dovish approach.

Such a scenario could widen the U.S.-German two-year yield spreads , enhancing the dollar's yield advantage over the euro and exerting further downward pressure on EUR/USD.

Technical indicators also support the bearish outlook, with both daily and monthly RSIs signaling downward momentum. EUR/USD has breached its 10- and 21-day moving averages, and the presence of an inverted monthly hammer candle for May, coupled with contracting 15-month Bollinger Bands, suggests that the recent rally from the 2025 yearly low may be nearing its conclusion.

The 1.1650-1.1700 support zone is now under threat and, if breached, a decline towards the 1.1400-1.1450 area could be anticipated.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)