EUR/USD Current Price: 0.9998
- Dollar rebounds sharply following US CPI data.
- Stocks move lower, yields higher after inflation figures.
- EUR/USD ends recovery dramatically, back to the parity zone.
The EUR/USD turned sharply lower on Tuesday, erasing three days of gains and fell to the parity area. The pair pulled back from three-week highs to the lowest level since Thursday following US inflation data that triggered a rally of the US dollar across the board. Stocks and Treasuries tumbled after the numbers.
The US dollar arrived at the CPI report with a negative streak and looked weak amid speculations of a negative reading for August. Instead, the Consumer Price Index rose 0.1% on a monthly basis and the annual rate dropped from 8.5% to 8.3%. The core CPI (which excludes food and energy) rose 6.3% from a year ago, above the 6.1% of market consensus. It is the last critical report ahead of next week’s FOMC meeting. On Wednesday, the Labor Department will release the Producer Price Index for August. Another reading above expectations could strengthen the dollar further.
The greenback now seems poised to hold firm ahead of the Fed decision next week. A 75 basis points hike is fully priced in and even some analysts started to call for a 100 bps hike. US yields jumped on Tuesday with the 2-year yield at fresh multi-year highs and the 10-year above 3.40%.
In Europe, the German September ZEW survey dropped more than expected in August. The Economic Sentiment index fell to -61.9 in September from -55.3 in August, while the Current Situation index fell to -60.5 down from -47.6. The deterioration in sentiment continues. Despite the negative economic outlook and the energy crisis, expectations are still for another 75 basis points rate hike from the European Central Bank at the next meeting in October.
EUR/USD short-term technical outlook
The EUR/USD pair approached 1.0200 again and then tumbled to 0.9988, breaking key short-term support levels like 1.0060. It bottomed at 0.9980 and it is hovering around 1.0000. The bias continues to point to the downside and more losses seem likely while under 1.0035. The next support stands at 0.9970, followed by 0.9910. A daily close below 0.9900 would point to fresh multi-year lows.
So far, the pair is back under the 20-day SMA, currently at 1.0009. The recovery of the euro failed to surpass not only 1.0200 but also a downtrend line. Tuesday’s decline shows that the negative dominant pressure remains in place. If the euro manages to rise back above 1.0060 over the next hours, it would alleviate the bearish pressure. The critical level on the upside is 1.0200, with a close above having the potential to change the short-term bias from bearish to neutral/bullish.
Support levels: 0.9995 0.9965 0.9910
Resistance levels: 1.0055 1.0110 1.0145
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD holds steady near 0.6250 ahead of RBA Minutes
The AUD/USD pair trades on a flat note around 0.6250 during the early Asian session on Monday. Traders brace for the Reserve Bank of Australia Minutes released on Monday for some insight into the interest rate outlook.
USD/JPY consolidates around 156.50 area; bullish bias remains
USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY.
Gold price bulls seem non-committed around $2,620 amid mixed cues
Gold price struggles to capitalize on last week's goodish bounce from a one-month low and oscillates in a range during the Asian session on Monday. Geopolitical risks and trade war fears support the safe-haven XAU/USD. Meanwhile, the Fed's hawkish shift acts as a tailwind for the elevated US bond yields and a bullish USD, capping the non-yielding yellow metal.
Week ahead: No festive cheer for the markets after hawkish Fed
US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.