In Tuesday’s European session, the EUR/USD pair experienced a slight decline below the significant resistance level of 1.0800. Investors remain cautious as they await the release of the United States Consumer Price Index (CPI) for April and the Eurozone’s preliminary Q1 Gross Domestic Product (GDP) data scheduled for Wednesday.
The upcoming US consumer inflation data is expected to play a pivotal role in shaping speculation regarding Federal Reserve (Fed) rate cuts, with market anticipation leaning towards a commencement of rate cuts starting from the September meeting. Elevated inflation readings in the first quarter, attributed to tight labor market conditions and robust household spending, have heightened investor focus on CPI data. A continuation of hot inflation readings could prompt traders to reconsider bets for Fed rate cuts in September and may counterbalance the optimism surrounding rate cuts fueled by easing labor market conditions.
EUR/USD Edges Lower Ahead of Key Economic Indicators
EUR/USD has edged slightly lower, hovering just below the critical resistance level of 1.0800. The pair’s movement mirrors Monday’s trading range, with the US Dollar exhibiting stability ahead of the release of producer and consumer inflation figures for April. The US Dollar Index (DXY), tracking the Greenback against six major currencies, maintains its position above the crucial support level of 105.00.
Investor attention remains focused on the upcoming US consumer inflation data, expected to soften. Prior to this, market participants are eagerly awaiting the Producer Price Index (PPI) data set to be released at 12:30 GMT on Tuesday. Projections indicate that producer inflation will persist, with annual headline PPI forecasted to accelerate by 2.2% and core readings expected to maintain steady growth at 2.4%.
Across the Atlantic, investors await the preliminary Eurozone Q1 GDP figures, anticipated to demonstrate stable expansion. Projections suggest quarterly and annualized GDP growth rates of 0.3% and 0.4% respectively, providing a potential relief for European Central Bank (ECB) policymakers amidst plans to commence lowering borrowing rates from the June meeting.
Technical Analysis: EUR/USD Confronts Resistance at 1.0800
EUR/USD encounters selling pressure near the round-level resistance of 1.0800, with the 200-day Exponential Moving Average (EMA) acting as a formidable barrier for Euro bulls.
While the pair navigates towards the downward-sloping boundary of the Symmetrical Triangle pattern formed on a daily timeframe, marked from the December 28 high to the October 3 low, market volatility contracts sharply within this pattern.
The 14-period Relative Strength Index (RSI) oscillates within the 40.00-60.00 range, indicative of indecision among market participants.