EUR/USD Stays Stable, Eyes Upcoming Data
The EUR/USD pair is hovering close to the 1.1650 mark, showing little change in its daily performance. Recent data on the U.S. core consumer price index (CPI) released on Tuesday was below expectations. Nonetheless, it hasn’t deterred the strength of the U.S. dollar (USD). Traders are now looking ahead to retail spending and factory inflation figures to better gauge the economic momentum in the U.S.
According to the U.S. Bureau of Labor Statistics (BLS), price pressures appeared stable in December, opposing forecasts of a rise in core inflation. Interestingly, this data didn’t impact the Federal Reserve’s policy outlook. Futures markets are nearly certain that rates will remain unchanged in the late January meeting. Moreover, the odds of a rate cut in March have fallen to 26%, down from nearly 40% just a week earlier, as per the CME FedWatch tool.
Market volatility has been relatively low, largely due to the absence of substantial macroeconomic announcements from Europe. In the U.S., attention is shifting towards retail sales and Fed officials speaking out. Additionally, there’s keen interest in a forthcoming ruling by the U.S. Supreme Court regarding President Donald Trump’s tariffs, expected later on Wednesday.
Daily Market Overview: US CPI Data Doesn’t Weigh on USD
- The U.S. dollar continues to show a generally positive outlook, despite the unexpectedly soft core CPI data issued on Tuesday. The overall inflation rate in December increased by 0.3%, reflecting a 2.7% year-on-year rate, aligning with market expectations. Conversely, core CPI slowed to 0.2% from 0.3% the prior month, resulting in an annual growth of 2.6%. This was unexpected, as forecasts anticipated increases of 0.3% and 2.7% respectively.
- On another note, the ADP reported an increase of 11,750 jobs in the first week of 2026, compared to 11,000 the previous week. This marks the fifth consecutive week of job growth, alleviating concerns about the labor market and supporting the case for stable Fed interest rates in the near future.
- Additionally, leaders from the European Central Bank (ECB), Bank of England (BoE), Bank of Canada (BoC), and several other central banks expressed support for Federal Reserve Chairman Jerome Powell in response to U.S. President Donald Trump’s unprecedented criticism. They emphasized the importance of maintaining their institutions’ independence for economic stability.
- Looking forward, U.S. retail sales data for November, set to be released late Wednesday, is expected to show a 0.4% increase, bouncing back from stagnant performance in October, aided by a rise in auto sales. Sales for other items, excluding automobiles, are also predicted to rise by 0.4%, mirroring last month’s results.
- Several Fed speakers are scheduled for the Americas session, including the notably dovish Gov. Stephen Milan, recently appointed by Trump. Other Fed officials such as Philadelphia Fed President Anna Paulson, Atlanta Fed President Rafael Bostic, Minneapolis Fed President Neel Kashkari, and New York Fed President John Williams will also host a press conference on Wednesday.
Technical Analysis: EUR/USD Eyes Key Support Level
The EUR/USD pair remains below the 1.1650 threshold, having retreated from around 1.1700 earlier this week. Current technical indicators reflect a neutral to bearish sentiment. The Moving Average Convergence Divergence (MACD) shows a flat pattern on the 4-hour chart, signaling a lack of momentum, while the Relative Strength Index (RSI) rests below 43, indicating reduced demand.
The price action continues to stay within a descending channel from highs seen in late December. Recent intraday lows hover around 1.1635, while the one-month low stands at 1.1618, which keeps bears in focus. A crucial level of interest lies just below 1.1600, where both the channel’s bottom and the low from December 2 converge.
Immediate resistance is noted at the channel’s upper boundary, currently around 1.1685, just above Monday’s peak near 1.1700. Further targets could be seen near the January 6th high of 1.1740.
Upcoming Economic Indicators
Producer Price Index (Year-on-Year Change)
This index, published by the Department of Labor, measures average price changes across processing states for producers in major U.S. markets. It serves as a significant indicator of commodity inflation, with higher numbers generally viewed as favorable for the U.S. dollar.
Retail Sales (YoY)
Retail sales data from the U.S. Census Bureau assesses total retail and grocery receipts on a monthly basis. This metric indicates changes in the total goods sold at retail, playing a vital role in assessing consumer spending, which is crucial for the U.S. economy. Results exceeding expectations are deemed positive for the U.S. dollar; conversely, lower-than-expected results can negatively affect it.
