Euro remains capped below 1.1660 ahead of German inflation data

EUR/USD rebound from 1.1585 lows has stalled below the range top, at 1.1660.
An extension of the US-Iran truce has triggered a moderate risk appetite.
Mixed Eurozone data has weighed on the Euro, as traders await German inflation numbers.

Guillermo Alcala FXStreet

The Euro (EUR) holds moderate losses against the US Dollar (USD) on Friday, with price action trapped within the last two weeks’ trading range, below 1.1660. The risk relief triggered by the US-Iran peace extension has been offset by a string of mixed Eurozone figures, and investors await German inflation figures to confirm expectations that the European Central Bank will hike rates in June.

News that Washington and Tehran have reached a memorandum of understanding to extend the ceasefire for 60 days and allow negotiations on Iran’s nuclear program to continue has brightened market sentiment. Market optimism, however, remains moderate as the agreement still needs to be ratified by the US and Iranian governments.

In the Eurozone, data from France disappointed, with the Q1 Gross Domestic Product (GDP) Contracting. Inflation figures in France and Spain undershot expectations, although they remain at levels well above the ECB’s 2% target. On the positive side, the German Unemployment Rate declined unexpectedly in April, and the Italian Q1 GDP accelerated.

The market is now focusing on Germany's preliminary Harmonized Index of Consumer Prices (HICP) data for May, due later on Thursday. German consumer inflation is also expected to have moderated this month, following a sharp acceleration in April and March, boosted by the energy shock stemming from Iran’s war.

Technical Analysis: Bulls need to break above 1.1660

EUR/USD trades at 1.1643, holding a neutral-to-bullish stance. The 4-hour Relative Strength Index (RSI) consolidates above the key 50 level, with a slightly positive Moving Average Convergence Divergence (MACD) reading hinting at a mild positive momentum. The pair, however, needs to breach the 1.1660 level to confirm a bullish reversal.

If 1.1660 finally gives way, the focus would shift to the May 14 high, at 1.1720, which might test bulls ahead of May's peak, in the 1.1790 area. Bearish attempts, on the contrary, remain contained above 1.1625 on Friday, which is guarding the bottom of the range, near 1.1575 (May 21 low). Further down, the next target emerges at the April bottom in the 1.1505-1.1525 area.

(The technical analysis of this story was written with the help of an AI tool.)

Economic Indicator

Harmonized Index of Consumer Prices (MoM)

The Harmonized Index of Consumer Prices (HICP), released by the German statistics office Destatis on a monthly basis, is an index of inflation based on a statistical methodology that has been harmonized across all European Union (EU) member states to facilitate comparisons. The MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP), released by the German statistics office Destatis on a monthly basis, is an index of inflation based on a statistical methodology that has been harmonized across all European Union (EU) member states to facilitate comparisons. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish.

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