EUR/USD Forecast – Lower after Another Hot US Inflation Report Raises Fed Rate Hike Fears

The Euro is trading lower against its U.S. counterpart late in the session on Thursday after data showed U.S. producer prices for January came in higher than estimated and weekly jobless claims fell, suggesting that the Federal Reserve will have to keep monetary policy tight for some time to bring down inflation.

At 20:00 GMT, the EUR/USD is trading 1.0676, down 0.0011 or -0.11%. The Invesco CurrencyShares Euro Trust ETF (FXE) is at $98.51, down $0.12 or -0.12%.

The U. S. producer price index bounced to 0.7%, higher than both consensus forecast of 0.4% and the December number, which showed a drop of 0.2%.

U.S. jobless claims data also showed a resilient labor market, with claims of 194,000, compared with expectations of 200,000, according to a Reuters poll.

In other bearish news weighing on the single-currency, Federal Reserve Bank of Cleveland President Loretta Mester said the central bank could become more aggressive with rate rises if inflation surprises to the upside. Despite Mester’s hawkish tone, she said she does not expect the U.S. to fall into recession.

Daily EUR/USD Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 1.0655 will signal a resumption of the downtrend. A move through 1.1033 will change the main trend to up.

The minor trend is also down. A trade through 1.0804 will change the momentum to up. This will shift momentum to the upside.

The closest support is a long-term 50% level at 1.0661. The nearest resistance is a pair of 50% levels at 1.0730 and 1.0758.

Daily EUR/USD Technical Forecast

Trader reaction to the long-term 50% level at 1.0661 is likely to determine the direction of the EUR/USD into the close on Thursday.

Bearish Scenario

A sustained move under 1.0651 will indicate the presence of sellers. If this creates enough downside momentum then look for the start of a possible acceleration to the downside with the next major target the Jan. 6 main bottom at 1.0483.

Bullish Scenario

A sustained move over 1.0651 will signal the presence of buyers. If this move generates enough upside momentum then look for a late session surge into a pair of 50% levels at 1.0730 and 1.0758.