EURUSD continued with its seven-week downtrend, as the euro traded at 3-month lows on the back of Tuesday’s US consumer inflation data showing a heated US economy. The pair was trading at 1.0707 at 08.00 am GMT, and touched 1.0703, a three-month low. Furthermore, the greenback has solidified gains made against six of the world’s leading currencies, with the DXY index near three-month highs at 104.826 at the time of writing.
The January Core CPI inflation data released by the Bureau of Labor and Statistics showed that consumer inflation (excluding energy and food prices) rose by 0.4%, beating the forecast estimate of 0.3%. This has diminished hope of interest rate cuts in March. We are already halfway through the first quarter, and it is unlikely the inflation rate will come down to the Fed’s preferred 2% within the next month and a half.
The euro is currently hovering around 3-month lows against the US dollar, and the Eurozone’s stuttering economy means the European Central Bank (ECB) is unlikely to lower interest rates during its next decision in April 2024. Meanwhile, two key releases could impact the EURUSD trading pair. Eurostat will on Wednesday release the Eurozone Q4 2023 GDP and December 2023 Industrial Production figures. However, these figures are unlikely to have the same impact as the US CPI release.
Technical Analysis
The RSI momentum indicator shows that the EURUSD pair lacks upward momentum. The pair will likely pivot at 1.0704, with downside action more likely. The first support will likely come at 1.0690, and a breach of this level will signal strong bearish control. Such an action could see the downward action extend to the second support at 1.0670. In the alternative, the pair will need to swing above 1.0740 to build the momentum to test the first resistance at 1.0750. Moreover, the pair could make marginal gains beyond that point to test the second resistance at 1.0775.
EURUSD 30-minute chart