EUR/USD Forecast: Caution leads ahead of US inflation figures

EUR/USD Current Price: 1.0769

• ECB and Fed speakers flooding the macroeconomic calendar at the beginning of the week.
• Investors await the United States January Consumer Price Index before jumping in.
• EUR/USD trades with a softer tone after failing to advance beyond 1.0800.

The EUR/USD pair retreated after reaching a one-week high of 1.0805 and trades around 1.0770 ahead of the United States (US) opening. Financial markets kick-started the week cautiously, awaiting the release of fresh US inflation data. The country will publish the January Consumer Price Index (CPI) a critical guidance for future Federal Reserve's (Fed) decisions. Adding to the market's quiet stance, major Asian markets were closed amid local holidays at the beginning of the week.

Meanwhile, easing US Treasury bond yields undermine demand for the US Dollar. The 10-year note currently offers 4.16%, down 3 basis points (bps) from its previous close. Wall Street, on the other hand, reflects a better mood. The tech sector leads the advance, with the S&P 500 trading at record levels ahead of the opening. Further gains there will likely maintain the USD at check.

Data-wise, the macroeconomic calendar has little to offer, although multiple central banks' officials will be on the wires. European Central Bank (ECB) Governing Council member Pablo Hernandez de Cos said the ECB's March economic projections will be pivotal for deciding when to start cutting interest rates. Executive Board member Philip Lane will be next to hit the wires, followed by a row of Fed speakers in the American session.

EUR/USD short-term technical outlook

The EUR/USD pair trades in the red after advancing in the previous four days, and the technical picture suggests bears will maintain the pressure. Technical indicators in the daily chart develop below their midlines with neutral to bearish slopes, reflecting increased selling interest. At the same time, a directionless 100 Simple Moving Average (SMA) provides resistance at around 1.0790, with spikes beyond the level being quickly reverted. Finally, the 20 SMA keeps heading south above the longer one, in line with the bearish tone.

The 4-hour chart shows EUR/USD has pierced a flat 20 SMA and is currently developing below it, as the longer moving averages head south far above the shorter one. At the same time, technical indicators rotated south and break through their midlines, although their directional strength seems limited. Sellers will be looking for a slide through 1.0720 to confirm the bearish bias and add to their shorts.

Support levels: 1.0720 1.0695 1.0650

Resistance levels: 1.0790 1.0840 1.0880