EUR/USD Forecast: Hot US CPI triggers risk aversion

EUR/USD Current price: 1.0788

• The US Consumer Price Index rose 3.5% YoY in March, core annual CPI rose 3.8%.
• The FOMC Meeting Minutes will be out in the American afternoon.
• EUR/USD collapsed with fears and is technically poised to extend its slump.

The EUR/USD pair traded uneventfully around the 1.0850 mark for most of this Thursday as investors held in wait-and-see mode ahead of the release of the United States (US) Consumer Price Index (CPI). The Bureau of Labor Statistics (BLS) finally reported that the March CPI was up by 0.4% MoM and 3.5% YoY, higher than anticipated. Core figures also surpassed expectations, all of which indicate stubbornly high inflation. As a result, financial markets turned risk-averse, with the US Dollar soaring across the FX board, as the news gave room to the Federal Reserve (Fed) to further delay a potential rate cut.

The Fed will publish the Federal Open Market Committee (FOMC) meeting minutes next. The document's impact will likely be limited after the latest comments from Fed Chair Jerome Powell, indicating that policymakers are in no hurry to trim rates, given inflation is still above target and the economy's resilience to higher rates.

Investors will shift their focus to the European Central Bank (ECB), which will announce its decision on monetary policy on Thursday. The ECB is widely anticipated to keep rates on hold, and attention will turn to whether policymakers are leaning towards trimming interest rates in June.

EUR/USD short-term technical outlook

The EUR/USD trades below the 1.0800 threshold, and technical readings in the daily chart suggest further slides are likely. The pair plummeted below all its moving averages after meeting sellers around a flat 100 Simple Moving Average (SMA). At the same time, technical indicators head firmly south within negative levels, retreating from their midlines and suggesting sellers are now in control.

In the near term, the 4-hour chart also supports a bearish continuation, given that technical indicators head south pretty much vertically. Indicators remain above oversold readings, which keeps the door open for additional slides. Finally, EUR/USD trades below all its moving averages, with the 20 SMA gaining downward traction around 1.0840, reinforcing the resistance area.

Support levels: 1.0760 1.0720 1.0685

Resistance levels: 1.0800 1.0840 1.0875