EUR/USD Lower as Traders Cautiously Await US PCE Inflation Data

Highlights

• Eurozone inflation drops as ECB considers interest rates.
• US inflation figures under close watch by investors and Fed officials.
• Federal Reserve officials open to more rate hikes amidst high inflation.

Overview

The Euro is down slightly on Friday as investors await the release of U.S. inflation data, which may influence the U.S. Federal Reserve’s interest rate decision.

Strong German inflation figures boosted the Euro on Thursday, but the market is now relatively calm.

Data released on Friday showed Eurozone inflation dropped by the most on record in March, while core prices accelerated, potentially strengthening the case for more interest rate hikes by the European Central Bank.

At 10:49 GMT, the EUR/USD is trading 1.0875, down 0.0031 or -0.28%. On Thursday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $100.71, up $0.60 or +0.60%.

Markets Await US Inflation Figures as Fed Officials Keep Door Open for Rate Rises

Investors are waiting for the February reading of the Personal Consumption Expenditures (PCE) price index, which is due at 12:30 GMT, after January figures showed a significant increase in consumer spending.

The PCE inflation figures are closely monitored by the Federal Reserve, and economists predict that the core PCE index will ease to 0.4% in February, but remain at 4.7% on an annual basis.

Three Federal Reserve officials have indicated that they are open to more rate hikes to combat high inflation levels, with two suggesting that problems in the banking sector could help cool price pressures faster than anticipated.

Daily EUR/USD Technical Analysis

The main trend is up according to the daily swing chart. A trade through 1.1033 will reaffirm the uptrend. A move through 1.0517 will change the main trend to down.

The minor trend is also up. A trade through 1.0713 will change the minor trend to down. This will shift momentum to the downside. A trade through the minor top at 1.0930 could trigger a breakout to the upside.

The nearest resistance is the long-term 50% level at 1.0943. The closest support is 1.0821.

Daily EUR/USD Technical Forecast

Trader reaction to 1.0876 is likely to determine the direction of the EUR/USD on Friday.

Bullish Scenario

A sustained move over 1.0876 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into 1.0930 – 1.0943.

Taking out 1.0943 could trigger an acceleration to the upside with 1.1033 the next major target.

Bearish Scenario

A sustained move under 1.0875 will signal the presence of sellers. This could trigger a break into the pivot at 1.0821. Look for a technical bounce on the first test of this level, but if it fails, then look for an acceleration to the downside with 1.0713 the next target.