- The EUR/USD turned to the downside after approaching 1.0950, falling below 1.0900.
- The US Dollar remains strong, supported by US economic data.
- Eurozone CPI and US Core PCE will be released on Friday.
The EUR/USD lost ground for the second day in a row on Thursday and dropped below 1.0900 on the back of a stronger US Dollar, which gained momentum from robust economic data. In the Eurozone, inflation data came in mixed, showing a slowdown in Spain and a rebound in Germany that did not surprise.
Data released on Thursday showed that German inflation rose slightly in June, with the annual rate increasing from 6.1% to 6.4%. Analysts pointed out that the increase was attributed to cuts in energy prices and transportation costs, without which the inflation rate would have fallen. Looking into the details, the slowdown in inflation appears to remain in place. On Friday, the Eurozone Consumer Price Index data is due. European Central Bank officials made it clear that a rate hike is coming in July, as inflation remains stubbornly high.
Federal Reserve Chair Powell reiterated his hawkish message on Thursday, stating that most policymakers expect more rate hikes this year. Adding to those comments, economic data from the US came in above expectations, with Initial Jobless Claims dropping from the highest level since 2021 to the lowest level in four weeks at 239K. A key report is due on Friday, the Core Personal Consumption Expenditure Index, which is the Fed's preferred inflation indicator. Numbers above expectations could cement a rate hike from the Fed at the next meeting.
EUR/USD short-term technical outlook
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The EUR/USD lost ground for the second day in a row but held above the 20-day Simple Moving Average (SMA). The pair still trades within a range, now below 1.0900 and testing the 1.0860 support area. A consolidation below this level would set up more losses for the Euro, potentially targeting 1.0800.
Risks in the short term are tilted to the downside. Technical indicators in the daily and 4-hour charts are moving south, supporting bearish pressure and suggesting another test of 1.0860. The bearish pressure will remain intact while under 1.0900. The Euro needs to surpass the 20-period SMA in the 4-hour chart and the 1.0920 zone to gain support.
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