Euro Slides Against Perky Dollar As US Inflation Springs Upside Surprise

EUR/USD Analysis and Charts

– US consumer prices saw a 3.2% increase last month, slightly surpassing expectations.

– Despite a decrease in core inflation, it still exceeded consensus estimates.

– EUR/USD continued its downward drift.

The Euro experienced a slight decline against the stronger US Dollar following official reports indicating a rise in inflation in the US, the world’s largest economy. In February, US consumer prices climbed by 3.2%, slightly surpassing the 3.1% recorded in January, which was anticipated to repeat. The ‘core’ inflation rate, excluding volatile food and fuel prices, increased by 3.8%, surpassing the forecast of 3.7% but falling just below January’s 3.9%. Various factors such as housing rents, airline fares, clothing, and car insurance contributed to this uptick in prices. While consumers may feel less financially strained than before, the cost of essential goods continues to rise. The US Federal Reserve has been raising interest rates aggressively to combat inflation. Although the market expects rate cuts this year, persistent pricing strength will challenge investor confidence in the US central bank. Nonetheless, inflation is still on a downward trend, and the Chicago Mercantile Exchange’s ‘Fedwatch’ tool indicates expectations of a reduction in US borrowing costs starting in June. Nevertheless, any unexpected increases in inflation could disrupt this scenario, making this data series crucial. The European Central Bank has provided support for the Euro by indicating no rush to cut interest rates as it evaluates domestic inflation. The next monetary policy meeting of the ECB is scheduled for April 11.

EUR/USD Technical Analysis

The Euro ap9999999pears to be weakening slightly within the wide and well-established uptrend channel observed since mid-February lows. In the near term, attention will be on support levels at the closing high of March 6, at 1.08976, and the channel’s base support at 1.08504. The market remains above its 200-day moving average, which lies below both support levels at 1.08328. Additionally, it is comfortably above the longer-term uptrend line established since October 2023, having already bounced off it once this year. Euro bulls aim to reclaim resistance at 1.09453, last Thursday’s closing high, with potential focus shifting to the channel top at 1.1000 if achieved. Trader sentiment data from IG reveals mixed views on the Euro’s direction, with 59% of traders leaning bearish. Given this uncertainty and the Euro’s downward trend, cautious traders may prefer to wait and observe whether there is a threat to the broader uptrend before taking positions.