EUR/USD Forecast: Cautious optimism after US CPI figures

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0795

The US Consumer Price Index rose by 0.1% MoM and 3.1% YoY in November.
The Federal Reserve will announce its decision on monetary policy on Wednesday.
EUR/USD struggles around 1.0800, could turn bearish once below 1.0760.

The EUR/USD pair recovered some ground on Tuesday, flirting with the 1.0800 threshold mid-European session. Market players dropped the US Dollar ahead of the release of the United States (US) Consumer Price Index (CPI) as stock markets edged higher in Asia, underpinning their overseas counterparts.

The Euro advanced despite Germany releasing a mixed ZEW Survey. The Economic Sentiment improved more than anticipated in the country, up to 12.8 in December and 23 in the EU. However, the assessment of the current situation resulted worse than expected, printing at -77.1 vs -75.5 forecast.

EUR/USD traded not far from an early peak of 1.0809 when the US reported the CPI rose 3.1% YoY and 0.1% MoM in November, as expected. The pair peaked higher as markets turned cautiously optimistic ahead of the Federal Reserve (Fed) monetary policy decision to be released on Wednesday. Policymakers are widely anticipated to maintain rates on hold, with market participants expecting a rate cut as soon as Q1 2024. CPI figures confirm such speculation, leading to gains in high-yielding assets.

EUR/USD short-term technical outlook

The EUR/USD pair eased from an intraday high of 1.0829 and hovers around the 1.0800 mark, also above the 38.2% Fibonacci retracement of the 1.1275/1.0447 slump at 1.0761. The immediate Fibonacci resistance comes at 1.0860, the 50% retracement of the same rally.

From a technical point of view, the EUR/USD pair's bullish potential seems limited. The daily chart shows the pair met sellers around a directionless 200 Simple Moving Average (SMA) while the 20 SMA turned marginally lower well above it. In the meantime, technical indicators tick higher, although within negative levels.

In the near term, the 4-hour chart shows that the pair develops a handful of pips above directionless 20 and 200 SMAs while the 100 SMA grinds south well above the current level. Finally, technical indicators crossed their midlines into positive territory but without enough strength to confirm a bullish continuation. EUR/USD could turn bearish on a downward extension below 1.0760.

Support levels: 1.0760 1.0725 1.0680

Resistance levels: 1.0830 1.0860 1.0900

View Live Chart for EUR/USD

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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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