EUR/USD found some momentum on Tuesday, rising over 0.8% as the pair benefitted from an intraday rally. Euro bidders were supported by hopes of a potential political accord in France, which could prevent a complete collapse of the country’s government. Meanwhile, a slower-than-expected rise in US Producer Price Index (PPI) inflation also provided some tailwinds for the Euro. With limited economic data coming from Europe, traders are largely reacting to US market flows and broader sentiment.
Market Overview: US Inflation Data Offers Mixed Signals
The latest US PPI data showed headline inflation increasing by 3.3% year-over-year (YoY), up from 3.0% previously. Core PPI, which excludes volatile food and energy prices, rose 3.5% YoY, compared to 3.4% in the prior month. While both figures came in below expectations, inflationary pressures continue to simmer in the background. Despite this slight easing, inflation remains above the Federal Reserve’s (Fed) annual target of 2%, leaving little room for speculation about rate cuts in the near term.
Looking ahead, the US Consumer Price Index (CPI) for Wednesday is expected to rise to 2.9% YoY from 2.7% previously, signaling that inflation remains well above the Fed’s target and supporting the case for a cautious approach to monetary policy tightening.
EUR/USD Technical Outlook: Bearish Bias Remains
EUR/USD climbed back into the 1.0300 range on Tuesday, heading into Wednesday with some positive momentum. However, the pair remains entrenched in bearish territory after briefly falling below 1.0200 earlier this week, marking a fresh 265-month low. EUR/USD is still trading well below its 200-day Exponential Moving Average (EMA), facing a technical rejection from this key level in November.
While the 1.0200 level may serve as a near-term technical floor for bulls to stage a recovery, traders are advised to remain cautious. A stronger reversal may require confirmation of a higher low, with traders looking to the first quarter for clearer signals of a potential shift in the pair’s broader trend.
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