Euro (EUR/USD) Analysis and Charts
- US consumer prices rose by 3.2% last month, a tick ahead of forecasts
- Core inflation edged down but, again, beat consensus
- EUR/USD slipped again, continues to drift lower
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The Euro slipped a little against a broadly stronger United States Dollar on Tuesday in the wake of official data showing inflation had ticked up in the world’s largest economy,
US consumer prices rose by 3.2% in February, just ahead of the 3.1% seen in January which was expected to have been repeated. The ‘core’ rate, which strips out the volatile effects of food and fuel prices, rose by 3.8%, above the 3.7% forecast but just below the 3.9% seen in the previous month.
The price of housing rents, airline fares, clothes, and car insurance all contributed to this latest rise and, while consumers are less squeezed than they were, the cost of many essentials continues to rise.
The US Federal Reserve has increased interest rates aggressively in a bid to fight inflation and, while the market is heavily betting on reductions this year, continued pricing strength will test investor confidence in the US central bank. That said inflation is still trending lower and the Chicago Mercantile Exchange’s ‘Fedwatch’ tool still shows a base case that US borrowing costs will start to come down in June.
That thesis can’t afford too many upside inflation surprises, however, and this data series will remain absolutely crucial.
The Euro has garnered the support of its own from the European Central Bank, which apparently remains in no hurry to cut its interest rates as it assesses the domestic inflation picture. That organization won’t meet to set monetary policy again until April 11.
EUR/USD Technical Analysis
EUR/USD Daily Chart Compiled Using TradingView
The Euro seems to be wilting a little within the wide and quite well-respected uptrend channel which has contained trade since the lows of mid-February. The market will now eye near-term support at March 6’s closing high of 1.08976 ahead of channel base support at 1.08504.
The market remains above its 200-day moving average which comes in below both of those levels at 1.08328. It is also well above the longer-term uptrend line established since October 2023, at which the market has already bounced once this year.
Euro bulls’ immediate task is to try and retake resistance at 1.09453, last Thursday’s closing high. If they can, the channel top will be back in focus at 1.1000.
IG’s sentiment data finds traders’ views as to where the Euro goes from here very mixed. The bears are out in front, with 59% coming to this market from that side. That’s not the sort of lead that cries out for a clear contrarian play, and the Euro’s drift lower does seem likely to continue.
EUR/USD
Mixed
of clients are
net long.
of clients are
net short.
| Change in | Longs | Shorts | OI |
| Daily | 2% | -12% | -3% |
| Weekly | -2% | 11% | 2% |
The uncommitted may want to wait and see whether this comes to threaten that broader uptrend before getting involved.
By David Cottle for