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EURUSD Prediction As Eurozone Inflation Cools

EURUSD traded near 3-week highs at the opening of the European session on Thursday, as sentiment around FOMC minutes weighed down on the US dollar. The trading pair exchange rate stood at 1.0868, up +0.45% at 9.05 am GMT. It is a continuation of an uptrend going back to February 14, and traders are now eying potential monthly highs.

Federal Reserve policymakers met in January, and the minutes released on Wednesday show that some members were convinced that US interest rates for this cycle may have peaked. The market has already bet on post-June Fed rate cut. However, the Fed’s cautious balance between inflation and the economy will provide fodder for other currencies to recover their recent losses against the dollar.

The Eurozone’s composite Purchasing Managers Index (PMI) improved in February, rising to 48.9 from January’s 47.9 and beating the forecast figure of 48.5. Notably, the growth was underlined by a higher-than-expected improvement in the services industry, while the manufacturing industry was slightly below the forecast (47.5), coming in at 47.1.

The Eurozone Consumer Price Index (CPI) figures released on Thursday met analysts’ projections and may not alter EURUSD’s current trajectory. The Year-on-Year CPI came at 2.8% and the Month-on-Month print for January 2024 was -4%. The fall in the January inflation aligns with the European Central Bank’s target of bringing down interest rate to 2%. Furthermore, the figures signal that the Eurozone economy is on a positive trajectory after a prolonged struggle over the last year.

Ultimately, US Initial Jobless Claims data will determine where EURUSD will close the day. Consensus forecasts expect the figure to come in at 217,000, and a swing on either side will provide fresh impetus to the pair.

Technical Analysis

EURUSD is on a week-long bullish upsurge and has found a pivot at 1.0830. The RSI indicator signals that further gains are highly probable. The bulls will likely encounter resistance at 1.0885, but a break past this mark could provide sentiment to target the 1.0900 psychological level. Alternatively, the pair could lose momentum, trade below the pivot, and break the 1.0805 support. Further bearishness at that level could see the bears pull towards 1.0790.