- US annual consumer inflation slows to 5%, the smallest since May 2021.
- US Dollar tumbles on lower Treasury yields.
- EUR/USD keeps bullish bias, faces resistance at psychological 1.1000.
The EUR/USD rose on Wednesday and posted the highest close in two months near the 1.1000 area. The Euro was among the top performers, while the US Dollar tumbled after US inflation data. The Greenback looks set to extend losses across the board.
The annual inflation rate in the US dropped in March to 5%, the smallest since May 2021 and below the 5.2% of market consensus. However, the Core rate edged higher from 5.5% to 5.6%, matching market consensus. The numbers show that inflation has likely peaked, but the Core rate remains hot, keeping the door open to another rate hike from the Federal Reserve, which will likely be the last one of the tightening cycle. The FOMC minutes showed no new information. The US Dollar remained under pressure, and a decline in equity prices on Wall Street helped it stabilize.
US yields dropped modestly on Wednesday but rose in Europe. The divergence favored the Euro and is driven by expectations that the European Central Bank (ECB) will raise rates further.
On Thursday, the final March German CPI is due; it is expected to remain unrevised at 0.8%, and Eurostat will release February Industrial Production. In the US, more inflation data is due with the March Producer Price Index; the weekly Jobless Claims report is out.
EUR/USD short-term technical outlook
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The EUR/USD broke above 1.0930 and jumped to test the 1.1000 area. So far, it has been unable to break it, but remains near, with the bullish tone intact. The daily chart shows the Euro headed to test the February high at 1.1032, with the price firm above a bullish 20-period Simple Moving Average.
The 4-hour chart also presents signs of more gains ahead; however, with the RSI flattening around 70, some consolidation could be seen before a break above 1.1000. If the pair fails to climb above 1.1000 over the next hours, it could correct with the initial support at 1.0975. A slide toward 1.0930 could be seen as an opportunity for bulls, but if it drops firmly below, Euro’s outlook will weaken.
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