EUR/USD Price Forecast: US Inflation to Leave the EUR at sub-$1.00

For the EUR, it was a busy morning on the Eurozone economic calendar. Finalized June inflation figures for France and Germany were in the spotlight this morning, ahead of industrial production figures for the Eurozone.

With inflation continuing to be the hot topic and the bugbear for the ECB, the markets were looking for any upward revisions.

For Germany, the annual rate of inflation softened from 7.9% to 7.6% in June.

According to Destatis,

• Energy prices were up 38% from the same month a year earlier, driven by the situation of war and crisis.
• Bottlenecks due to supply chain disruption, attributed to the COVID-19 pandemic, also pushed prices upwards.

In France, the annual rate of inflation accelerated from 5.2% to 5.8%.

According to Insee,

• Energy price acceleration drove consumer prices higher, with energy prices up 33.1% in June (27.8% in May) year-on-year.
• Prices for services also contributed, rising from +3.2% to +3.3%.
• By contrast, prices for manufacturing goods slowed, falling from +3.0% to +2.5%.

With fears of a Eurozone recession hitting the EUR, industrial production figures will also draw plenty of interest.

Economists have forecasted production to rise by 0.3%, following a 0.4% increase in April. Weak numbers will test EUR support.

EUR/USD Price Action

At the time of writing, the EUR was down 0.23% to $1.00116.

A mixed morning saw the EUR rise to an early high of $1.00530 before falling to a low of $1.00074.

The EUR/USD left the Major Support and Resistance Levels untested early on.

Technical Indicators

The EUR/USD will need to move through the $1.0036 pivot to test the First Major Resistance Level (R1) at $1.0072 and resistance at the Tuesday high of $1.00737.

Market risk sentiment will need to improve to support a breakout from the morning high of $1.00530.

An extended rally would bring the Second Major Resistance Level (R2) at $1.0110 and resistance at $1.0150 into play.

The Third Major Resistance Level (R3) sits at $1.0184.

Failure to move through the pivot would bring the First Major Support Level (S1) at $0.9998 into play.

Another extended sell-off throughout the day would likely test the second Major Support Level (S2) at $0.9962 and support at $0.9900.

The Third Major Support Level sits at $0.9888.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal.

At the time of writing, the EUR sat below the 50-day EMA, currently at $1.01948.

The 50-day EMA slid back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, EUR/USD price negative.

While a move through R1 would support a run at $1.0150, the EUR/USD pair would likely fall well short of the 50-day EMA.

The US Session

It is a big day ahead, with US inflation figures due today. Following the FOMC meeting minutes and nonfarm payrolls, another spike in inflation would support a 75-basis point rate hike this month.

Economists forecast the annual rate of inflation to pick up from 8.6% to 8.8% in June.