EUR/USD Forecast: Bulls lead as US CPI looms

EUR/USD Current price: 1.0978

• A better market mood keeps the US Dollar on the back foot ahead of the US opening.
• The December United States Consumer Price Index is foreseen at 3.2% YoY.
• EUR/USD is bullish in the near term, direction will depend on the market's sentiment.

Financial markets ended Wednesday in a better mood, helped by Wall Street ending the day in the green. Asian and European indexes advanced, retaining gains ahead of the United States (US) opening and the release of the US Consumer Price Index (CPI).

Speculative interest remained side-lined for most of the week, awaiting fresh clues on what the Federal Reserve (Fed) will do next. Last week, stronger than anticipated, American employment-related figures put into doubt the chance of a soon-to-come rate cut, although after the dust settled, markets kept betting rates would be reduced next March.

CPI figures will likely confirm or deny such a view, with markets reacting in consequence. Price pressures are seen up by 3.2% YoY, increasing from the previous 3.1%. However, the core annual reading is foreseen at 3.8%, easing from the last 4%. Finally, the monthly CPI is expected at 0.2%. Results beyond market expectations could lead to speculation on reduced chances for a rate cut in March, pushing stock markets lower and the US Dollar higher on risk aversion.

Meanwhile, European Central Bank (ECB) Governor François Villeroy de Galhau said the French economy is slowing but won't have a recession, adding inflation should slow below 3% in a few months and return to 2% by the end of 2025. Earlier this week,  Villeroy affirmed the central bank should cut rates this year.

EUR/USD short-term technical outlook

The  EUR/USD pair trades near a fresh weekly high of 1.0988, and the daily chart shows bulls aim to retake control. The pair is battling to clear a bullish 20 Simple Moving Average  (SMA), which stands right around the current level, as the longer moving averages hold directionless far below the current level. In the meantime, technical indicators remain stuck to their midlines without evident directional strength.

In the near term, and according to the 4-hour chart, buyers add pressure. EUR/USD develops above a mildly bullish 20 SMA, which advances above a flat 200 SMA. At the same time, the price struggles around a directionless 100 SMA, with a clear break above it further encouraging bulls. Finally, technical indicators tick higher within positive levels, with modest bullish strength but still skewing the risk to the upside.

 Support levels: 1.0960 1.0920 1.0885  

Resistance levels: 1.1015 1.1060 1.1100

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