EUR/USD Prediction for February 28, 2017

The EUR/USD moved higher on Monday, but was unable to recapture resistance near the 10-day moving average at 1.0589.  Softer than expected Spanish inflation capped upside momentum. Support on the currency pair is seen near last week’s lows at 1.0492. Momentum remain negative, but appears to be turning neutral as the deceleration in the MACD generated a flat trajectory which reflects consolidation.

Spanish Inflation Was Softer than Expected

Spanish HICP inflation rose to 3.0% year over year from 2.9% year over year, a tad less than feared, but further above the ECB’s definition of price stability near 2%. So far base effects and energy prices are the main driver behind the uptick, as Draghi continues to stress. And while high unemployment in Spain will limit the room for wage demands, there are still inflation linked contracts that will guarantee second round effects, even if the government has moved to reduce these after the last financial crisis.