Eurozone Inflation Impact EUR/USD: ECB and Fed in Spotlight

Eurozone inflation impact on EUR/USD analyzed. Key ECB and Fed speeches. Technical levels outlined—mixed sentiment among retail traders.

EUR/USD Analysis

As the week approaches, the focus shifts to eurozone Consumer Price Index (CPI) data. Today, all eyes will be on the remarks from the President of the European Central Bank (ECB) and speakers from the Federal Reserve.

EUR/USD encounters resistance in the overbought zone.

Eurozone Inflation Impact EUR/USD: ECB and Fed in Spotlight

Despite a slight dip in the euro after weaker-than-expected US Consumer Price Index (CPI) figures earlier this week, the currency has been resilient. Market expectations suggest that the Federal Reserve may have reached the peak of its hiking cycle, leading to a ‘dovish’ repricing of expectations through December 2024. However, concerns linger as inflation remains persistent, and recent comments from Fed Chair Jerome Powell indicate a commitment to elevated interest rates. We are closely monitoring the potential impact of approximately 91 basis points in cumulative rate cuts by the end of 2024. While US Producer Price Index (PPI) data hinted at disinflation, Fed officials remain cautious.

In the eurozone, the EU Commission has stated that the region will likely avoid a technical recession. However, recent economic indicators, including disappointing industrial production figures, are bleak.

The upcoming day will feature key central bank speakers, including ECB President Christine Lagarde. Market observers await responses from Fed speakers regarding recent inflation and retail sales reports. Tomorrow’s inflation data may influence The euro’s fate, especially if actual figures align with estimates, potentially pulling the euro down from recent highs.

Technical Analysis

EUR/USD resistance is evident around the overbought mark on the Relative Strength Index (RSI), coinciding with the psychological handle at 1.0900. A significant drop in euro area inflation could push the pair below the 200-day moving average and back towards 1.0800.

Resistance Levels

• 1.1000
• 1.0900

Support Levels

• 1.0800/200-day MA
• 1.0700
• 1.0635
• 50-day MA
• 1.0600

IG Client Sentiment Data: Mixed

IG Client Sentiment (IGCS) data shows retail traders have mixed sentiments on EUR/USD. As of the latest data, 59% of traders hold long positions, with no clear dominance in net short positions.

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