EUR/USD has plunged after the US PCE price index data. The Federal Reserve usually monitors various metrics. However, it uses the personal consumption expenditures (PCE) price index as one of the key gauges of inflation. On Friday, the Bureau of Economic Analysis indicated that core PCE price index was up by 3.1% in April on a year-on-year basis. Economists had expected a reading of 2.9%, which was higher than the prior month’s 1.9%.
In its efforts to maintain a healthy economy, the US central bank’s inflation target is at 2%. However, it intends to allow it to rise above that level temporarily as a way of dealing with the unemployment issue. While the recent FOMC meeting minutes depicted the bank’s hawkish tone, actual tapering of asset purchases may be months away.
EURUSD Technical Outlook
After being on a bearish consolidation pattern for the second consecutive session, EUR/USD has recorded a bearish breakout. It has dropped from an intraday low of 1.2200 to 1.2132. At the time of writing, it was down by 0.41% at 1.2144. On a four -hour chart, it is trading below the 25 and 50-day exponential moving averages.
In the near term, I expect EUR/USD to continue trading below the important resistance level of 1.2200. The bulls may manage to trigger a rebound to 1.2190, which is along the 50-day EMA. On the flip side, a move below the current support level at 1.2132 will have the bears targeting the lower level of 1.2100.