• US CPI at 3.1% YoY with Core CPI at 3.9% contradicts softer inflation expectations.
  • Futures tilt towards later Fed easing, with consensus for unchanged rates in May.
  • US Treasury yield surge, reaching new highs since November, due to adjusted rate forecasts.
  • ZEW Economic Sentiment Index exceeds forecasts, indicating optimism for ECB and Fed policy shifts.

The EUR/USD tumbled from around daily highs at 1.0796 following a red-hot inflation report in the United States (US) that pushed back expectations of Federal Reserve interest rate cuts, as seen by futures market data. At the time of writing, the pair exchanged hands at 1.0715.

US CPI pushed back interest rate cuts by the US central bank

The US Department of Labor revealed that inflation ticked slightly above expectations, catching traders off guard. Headline inflation, as measured by the Consumer Price Index (CPI) for January, came at 3.1% YoY, lower than December’s data but above the 2.9% expected. Core CPI was unchanged at 3.9%, up from a 3.7% dip estimate on annual figures.

After the data, traders pushed back the first Fed rate cut to June, with traders seeing a 62% chance of keeping the federal funds rate at the 5.25%-5.50% range in May. US Treasury bond yields edged up, with 2s hitting 4.633%, its highest level since November 28, and the 10-year at 4.297%.

In the meantime, during the European session, the ZEW Economic Sentiment Index exceeded estimates and the previous reading data. ZEW President Achim Wambach commented, “Over two-thirds of respondents expect the European Central Bank to make interest rate cuts in the coming six months, and nearly three-quarters are anticipating imminent rate cuts by the US central bank.”

EUR/USD Price Analysis: Technical outlook

The major dipped towards the 1.0700 figure following the report, but buyers entered the market, lifting the exchange rate to the current exchange rates. A decisive break below 1.0700 could drive the spot towards the November 10 low of 1.0656. the next support would be 1.0600. on the flip side, if buyers regain the 100-day moving average (DMA) at 1.0790, look for a re-test of 1.0800.

EUR/USD

Overview
Today last price 1.072
Today Daily Change -0.0054
Today Daily Change % -0.50
Today daily open 1.0774
 
Trends
Daily SMA20 1.0829
Daily SMA50 1.0893
Daily SMA100 1.079
Daily SMA200 1.0831
 
Levels
Previous Daily High 1.0806
Previous Daily Low 1.0756
Previous Weekly High 1.0795
Previous Weekly Low 1.0723
Previous Monthly High 1.1046
Previous Monthly Low 1.0795
Daily Fibonacci 38.2% 1.0775
Daily Fibonacci 61.8% 1.0787
Daily Pivot Point S1 1.0752
Daily Pivot Point S2 1.0729
Daily Pivot Point S3 1.0702
Daily Pivot Point R1 1.0801
Daily Pivot Point R2 1.0828
Daily Pivot Point R3 1.0851

 

 

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