EUR/USD Price Forecast: Optimism weighs on the US Dollar

EUR/USD Current price: 1.0334

• US core inflation rose by less than anticipated in December, spurring optimism.
• Upbeat US banks earning reports fueled the market sentiment earlier in the day.
• EUR/USD is bullish in the near term, but needs to break above 1.0350 to extend its rally.

The EUR/USD pair managed to extend its recovery advance during the first half of Wednesday, stabilizing around the 1.0300 level mid-European session and ahead of the United States (US) December Consumer Price Index (CPI).

Ahead of the event, financial markets were cautiously optimistic, helped by earnings reports. Major US banks reported results that exceeded expectations. Goldman Sachs’ profits doubled during the fourth quarter, while JP Morgan announced that large asset and wealth management grew in the same quarter.

Data-wise, the Eurozone reported that November Industrial Production rose a modest 0.2% on a monthly basis, below the 0.3% anticipated by market players. Compared to a year earlier, Industrial Production was down 1.9%, worse than the previous 1.1% slide yet matching forecast. The tepid figures maintained the Euro in check.

The EUR/USD pair jumped north after the US CPI resulted softer-than-anticipated. Inflation in the US, as measured by the change in the CPI, rose 2.9% yearly in December as expected, yet the core annual reading resulted at 3.2%, below the 3.3% expected and the previous 3.4%.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows it keeps developing below a bearish 20 Simple Moving Average (SMA), providing dynamic resistance at around 1.0350. Furthermore, the 100 SMA extends its slide below a flat 200 SMA, both in the 1.0770/1.0800 region, which is too far away to be relevant but still indicates prevalent selling pressure. Finally, technical indicators remain within negative levels, with modest downward slopes.

In the near term, and according to the 4-hour chart, the risk skews to the upside, although the pair is currently retreating from the 1.0353. Still, technical indicators keep heading north well above their midlines, while EUR/USD develops above a flat 20 SMA. A mildly bearish 100 SMA, on the other hand, provides resistance around daily tops.

Support levels: 1.0285 1.0240 1.0190

Resistance levels: 1.0350 1.0385 1.0410