EUR/USD Lacks Momentum Ahead Of U.S. Inflation Data

U.S. Dollar Stays Calm As Traders Prepare For The Release Of Inflation Reports

EUR/USD continues to trade near 1.1420 while the U.S. dollar is flat against a broad basket of currencies.

The U.S. Dollar Index has recently made an attempt to get below 95.50 but failed to develop sufficient downside momentum. In case the U.S. Dollar Index declines below this level, it will move towards the support at 95.40 which will be bullish for EUR/USD.

The main event of the day is the release of U.S. inflation data. Inflation Rate is expected to grow by 7.3% year-over-year in January, while Core Inflation Rate is projected to increase by 5.9%.

These reports will have a major impact on currency dynamics on the foreign exchange market, and trading will likely remain calm until inflation data is released.

In case inflation exceeds analyst expectations, the U.S. dollar should get more support as traders would bet on aggressive rate hikes from the Fed. In the opposite scenario, EUR/USD should gain more ground.

It should be noted that traders should keep a close eye on the dynamics of U.S. government bond markets after the release of inflation reports, as the reaction to inflation data is often unpredictable.

Technical Analysis

EUR/USD continues its attempts to settle back above 1.1420. In case EUR/USD manages to settle above this level, it will move towards the next resistance which is located at 1.1450.

If EUR/USD gets above 1.1450, it will head towards the next resistance at 1.1465. A move above this level will open the way to the test of the resistance at 1.1485.

On the support side, a move below 1.1420 will push EUR/USD towards the support level which is located at 1.1390. A successful test of this level will open the way to the test of the support at 1.1370. In case EUR/USD declines below 1.1370, it will move towards the next support at the 20 EMA at 1.1360.

For a look at all of today’s economic events, check out our economic calendar.