EUR/USD analysis: inflation divergences back the greenback

Valeria Bednarik FXStreet

EUR/USD Current price: 1.2082

US PCE improves, but matches market's estimates, having a neutral effect on the pair.
EUR/USD nearing critical 1.2050/60 support area ahead of Wall Street's opening.

The EUR/USD pair broke below the 1.2100 figure as the dollar continues appreciating against its major rivals, with the decline of the common currency fueled by worse-than-expected German inflation figures. According to April preliminary estimates, the EU harmonized CPI edged lower 0.1% in the month, while advanced just 1.4% yearly basis, below the expected and previous 1.5%. The first US macroeconomic release failed to surprise, as core PCE inflation in March came as expected, up 0.2% monthly basis and 1.9% from a year earlier. The market barely reacted to the news, with the dollar still a few pips below its daily highs. Still pending of release are the April US Chicago PMI and Pending Home Sales for March.

The pair retains its short-term bearish stance but still needs to break below the 1.2160/50 region to confirm further slides ahead, heading toward the critical 1.2000 figure. Technical readings in the 4 hours chart continue to support a bearish extension, as indicators extended their declines within negative territory, maintaining their bearish slopes, while the 20 SMA heads sharply lower, capping the pair's attempts to regain the upside.

Support levels: 1.2055 1.2030 1.2000

Resistance levels: 1.2120 1.2160 1.2200

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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