The EUR/USD currency pair wrapped up the week trading within a narrow range. This followed a robust inflation report from the U.S., stirring uncertainty around the Federal Reserve’s forthcoming actions. As of now, the pair is at 1.1817, sitting slightly above last week’s low of 1.1745.
After the United States released its inflation data, EUR/USD maintained this limited range. The producer price index (PPI) registered an increase to 0.5% in January, up from 0.4% in December, which altered the annual growth rate from 3.3% to 3.6%.
Core PPI inflation climbed as well, going from 0.6% to 0.8%, while month-over-month figures shifted from 3% to 2.9%. These statistics underscore that inflation continues to be a significant worry in the U.S. There’s a growing sense—perhaps a justified one—that the Fed might hold off on rate cuts longer than analysts are anticipating.
Looking ahead, it seems U.S. inflation could stay elevated, especially with new conflicts sparking in the Middle East. Recently, Israel and Iran escalated their aggressive actions, leading to substantial counterattacks from Iran. This situation raises concerns that it could push oil prices upwards, particularly if shipping through the Strait of Hormuz becomes risky.
The EUR/USD pair also paid attention to the recent European inflation data. The composite consumer price index (CPI) fell to 1.9% in February, down from 2.1% in January, based on information from the German Statistical Office.
As we look forward, the U.S. is set to release its latest nonfarm payrolls data on Friday. This will provide a clearer picture of the labor market leading up to the next Federal Reserve meeting. Economists expect the unemployment rate to stay steady at 4.3% for February, with economic growth potentially adding over 60,000 jobs.
On the daily chart, EUR/USD displayed a flat line on Friday, trading at 1.1817, showing a slight increase from last week’s low of 1.1743. It also bounced back above the 50-day exponential moving average (EMA).
As the pair forms a descending wedge pattern with two converging trend lines, indicators like the Relative Strength Index (RSI) and MACD are both pointing upwards.
This suggests that the currency pair could experience significant volatility on Monday as traders consider the implications of the ongoing conflict in Iran on the market. Key support and resistance levels are likely to be 1.1700 and 1.2000.
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With over 8 years in financial analysis, coaching, and trading, Chrispus Nyaga brings his expertise from roles at prominent firms like ATFX, easyMarkets, and OctaFx. He has also contributed to various platforms such as SeekingAlpha and Capital.com. In his leisure time, he enjoys watching golf and spending time with his family.
