Market Update: EUR/USD and US Economic Indicators
On Wednesday, the EUR/USD pair is hovering around 1.1545 during trading in Asia. Other major currency pairs seem to be strengthening, with the US dollar remaining stable as investors await the Consumer Price Index (CPI) data set to be released at 12:30 GMT.
At this point, the US dollar index (DXY), which gauges the dollar’s strength against six key currencies, is essentially unchanged at approximately 99.96.
Market participants are keenly focused on the upcoming US inflation report, seeking insights into the Federal Reserve’s future monetary policy.
The CPI report is anticipated to reveal that headline inflation has risen to 4.2% year-on-year, up from 3.8% in April. Additionally, analysts expect core CPI, which omits fluctuating food and energy prices, to increase to an annualized rate of 2.9%, slightly higher than the previous 2.8%.
Meanwhile, in the euro zone, investors are on standby for the European Central Bank’s (ECB) monetary policy announcement slated for Thursday. There’s a general expectation that the ECB will raise its primary borrowing rate by 25 basis points, coupled with a hawkish stance on the monetary policy outlook, given that rising energy costs are contributing to inflationary pressures.
EUR/USD Technical Analysis
As it stands, EUR/USD is trading flat around 1.1545. The current spot prices are below the 20-period exponential moving average (EMA) of 1.1611, indicating a bearish near-term trend. The presence of a symmetrical triangle pattern hints at a sideways market movement overall.
The Relative Strength Index (RSI) is below the neutral mark at 37.9, showing persistent downside pressure, although it remains near recent lows.
Looking at the support levels, the first one aligns with the previous uptrend line break around 1.1502, where buying interest has previously emerged. If this uptrend line doesn’t hold, there’s a possibility of retreating to the March 13 low at 1.1411. On the upside, the initial resistance is represented by the 20-day EMA at 1.1611, followed by a more significant downtrend line resistance at around 1.1698. A consistent move above these resistance levels could ease the current bearish sentiment.
