EUR/USD analysis: Near-term bias turns neutral heading into next week’s FOMC meeting

  • The USD bounces off multi-week lows despite softer US CPI figures.
  • Euro was further weighed down by Trump’s warning to German.

The EUR/USD pair failed to capitalize on its early uptick and witnessed a turnaround during the North-American session on Wednesday amid resurgent US Dollar demand. Despite softer US consumer inflation figures, the greenback staged a modest rebound from 11-week lows and turned out to be one of the key factors behind the pair's intraday slide of around 60-pips to fresh weekly lows. Data released on Wednesday showed that the headline US CPI eased more than expected to 1.8% on yearly basis, while core CPI also fell short of consensus estimates and ticked down to 2.0% yearly rate from 2.1% recorded in the previous month.

The buck suffered a brief selling in reaction to the data but managed to rebound rather quickly. Given that a Fed rate cut move in the next few months is largely priced in, investors seemed inclined to cover their USD bearish positions heading into next week’s FOMC policy meeting. Meanwhile, the shared currency was further pressurized by the US President Donald Trump's comments that he is considering sanctions to block Russia's Nord Stream 2 natural gas pipeline project and warned Germany against putting itself at risk by depending on Russian energy.

The pair finally settled near the lower end of its daily trading range, around the 1.1280 region, though managed to regain some positive traction during the Asian session on Thursday. The pair now seems to have stabilized near the 23.6% Fibonacci retracement level of the 1.1133-1.1348 as market participants now look forward to Thursday's second-tier releases of the Euro-zone industrial production data and the usual US initial jobless claims for some impetus.

From a technical perspective, the pair continues to find some support near the previous descending trend-channel resistance breakpoint. This is followed by 38.2% Fibo. level support near the 1.1260-55 region, which if broken might turn the pair vulnerable to accelerate the slide further towards testing the 1.1200 round figure mark.

On the flip side, the 1.1340-50 region - just ahead of the very important 200-day SMA, now seems to have emerged as an immediate strong resistance, above which the pair is likely to aim towards reclaiming the 1.1400 handle before eventually darting towards March swing highs, around mid-1.1400s.

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