EUR/USD Forecast: Hotter US CPI puts markets in panic mode

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0710

The German ZEW survey showed the assessment of the current situation worsened further.
The United States Consumer Price Index unexpectedly rose in January.
EUR/USD approaches 1.0700 with a firm bearish momentum, could break lower.

The EUR/USD pair spent the first half of the day trading uneventfully around the 1.0770 price zone, as the Euro could not take advantage of the broad US Dollar’s weakness. The upbeat performance of Asian equities following an extended weekend undermined demand for the Greenback. The tech sector kept leading the way north among equities, as the Nikkei 225 soared following news that Tokyo Electron increased its full-year revenue and profit guidance.

On the other hand, Euro gains were limited by local news. Financial markets turned more cautious in Europe following a disappointing German ZEW Survey and ahead of the release of an update of the United States (US) Consumer Price Index (CPI). Germany reported that the Economic Sentiment improved more than anticipated in February, up to 19.9 from 15.2 in the previous month. The Eurozone Economic Sentiment also improved, to 25 from 22.7 in January. However, the assessment of the current situation plummeted to -81.7, the lowest reading since June 2020. On a positive note, the survey showed respondents expect an imminent interest rate cut in the US and the European Central Bank (ECB) proceeding in the next six months.

Finally, the US reported that inflation in January was higher than anticipated, and hell broke loose. The monthly CPI rose 0.3%, while the core reading printed 0.4%. Compared to a year earlier, inflation rose 3.1%, better than the previous 3.4% but above the 2.9% expected. Finally, the core annual CPI rose 3.9%. The market turned risk averse, with stocks plummeting and the US Dollar soaring across the FX board, as higher inflation means no rate cut in the near future.

EUR/USD short-term technical outlook

The EUR/USD pair trades at fresh lows below 1.0720, and pullbacks post-release have been shallow, suggesting the slide may continue. The daily chart shows a directionless 100 Simple Moving Average (SMA) keeps limiting advances around 1.0790, while the 20 SMA keeps heading south above it. At the same time, technical indicators turned sharply lower within negative levels, although far above oversold readings.

In the near term, and according to the 4-hour chart, the bearish case is firm. The pair develops below bearish moving averages, with intraday spikes above the 20 SMA being quickly reverted. Finally, technical indicators head south almost vertically, reflecting a solid selling interest.

Support levels: 1.0695 1.0650 1.0610

Resistance levels: 1.0745 1.0790 1.0840

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.

AUD/USD remains below 0.7000 amid light trading

AUD/USD fills a modest bearish gap on Monday, but remains below 0.7000 in the Asian session amid holiday-thinned liquidity. The US Dollar attempts a bounce even as US bond yields pull back from multi-year highs, limiting the pair. Moreover, diminishing odds of another RBA rate hike in November cap the Aussie.

USD/JPY hovers above 158.00 amid Japan/ US holiday

USD/JPY extends its range-bound price action into a new week, trading above 158.00 as bulls remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen. Meanwhile, softer US bond yields keep US Dollar bulls on the back foot and cap the pair's upside. However, geopolitical uncertainties could limit losses for the safe-haven buck amid thin liquidity due to a holiday in Japan and the US.

Gold drifts higher above $4,200 on surging ETF inflows, markets await US inflation data this week

Gold price gains ground to near $4,215 during the early Asian session on Monday. The precious metal extends the rally amid rising demand for bullion-backed exchange-traded funds and a weaker US Dollar. Yellow metal receives some support from rising investment demand, with inflows into gold-backed exchange-traded funds reaching a four-year high, according to Bloomberg data.

Week ahead: US CPI, France’s budget crisis and Q3 earnings to set the market tone

The US dollar held relatively strong this week, despite the disappointing US jobs report on October 2, which further decreased the probability of a back-to-back rate hike by the Fed at the upcoming gathering on October 28.

Middle East War updates: New attack launched on Saudi airport

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week. In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?