In Friday’s European session, the EUR/USD pair surged to 1.0800, bolstered by upbeat Eurozone inflation figures reported by Eurostat. The annual preliminary Eurozone Harmonized Index of Consumer Prices (HICP) exceeded expectations, with headline HICP rising by 2.6% and core HICP accelerating to 2.9%, both surpassing estimates. Despite a slower monthly growth in both headline and core HICP, the robust yearly figures fueled the Euro’s strength.
The inflation data, while not expected to alter market speculation for European Central Bank (ECB) rate cuts in the June meeting, may influence the pace of future rate cuts. A hotter inflation reading could prompt a more gradual approach from ECB officials, emphasizing the importance of remaining data-dependent.
Ahead of the release of the US core Personal Consumption Expenditure Price Index (PCE) data for April, EUR/USD traders should anticipate heightened volatility. Market participants await core PCE inflation growth of 0.3% monthly and 2.8% annually. The outcome may impact traders’ expectations regarding potential Fed rate cuts in the September meeting, especially considering the strong labor market outlook and upside risks to inflation highlighted by Fed policymakers.
Technically, EUR/USD maintains a firm position above 1.0800, supported by the breakout of a Symmetrical Triangle chart pattern. However, sustaining momentum above all short-to-long-term Exponential Moving Averages (EMAs) remains challenging. The Relative Strength Index (RSI) indicates fading upside momentum, suggesting a cautious outlook.
A decisive breach above 1.0900 could strengthen the pair towards higher resistance levels, while a downturn below the 200-day EMA at 1.0800 may lead to further downside pressure.
As the market awaits key economic data releases, EUR/USD is poised for continued volatility, influenced by both Eurozone and US inflation figures and central bank policy outlooks. Traders should remain vigilant for potential shifts in market sentiment and technical signals as the session progresses.
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