- EUR/USD stays under modest bearish pressure on Wednesday.
- US Dollar Index rises for the fourth straight day.
- Focus shifts to inflation data from the US.
After closing the seventh straight day in the negative territory, the EUR/USD pair extended its slide during the Asian trading hours and touched its lowest level since late March at 1.1700 before going into a consolidation phase. As of writing, the pair was posting small daily losses at 1.1710.
The unabated USD strength continues to weigh on EUR/USD. The US Dollar Index is currently trading at its strongest level in more than four months at 93.19, rising 0.13% on the day.
Later in the session, Consumer Price Index (CPI) data from the US will be looked upon for fresh impetus. On a yearly basis, CPI in the US is expected to edge lower to 5.3% from 5.4%. Unless the print is much lower than expected, the greenback is likely to continue to outperform its rivals on the Fed's tapering prospects before the end of the year.
Earlier in the day, the Harmonized Index of Consumer Price (HICP) for Germany, the European Central Bank's preferred gauge of inflation, arrived at 3.1% in July, matching June's print and the market expectation.
EUR/USD near-term outlook
Société Générale analysts think that EUR/USD could target 1.1600 with a break below 1.1700. “Support for EUR/USD below 1.1704 is at 1.1695. A deeper pullback towards 1.1600 beckons on a successful break," analysts explained. "A below-forecast number on US CPI today could elicit pockets of short-covering, only for the rally to be sold again."
EUR/USD to suffer a substantial drop to 1.16 on a slide below 1.17 – SocGen.
Additional levels to watch for
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