EUR/USD was bearish throughout this year until October as the USD kept surging on the FED raising interest rates in a hectic manner. But, the ECB also started to raise rates in summer and the Euro has been trying to catch up. The FED has been giving dovish signals recently as inflation starts to slow down, which has improved the risk sentiment sending the Euro higher, while the USD has been hit hard on the other hand.

This week we saw some bullish momentum in this pair, but USD buyers came back and the price remained unchanged, confined to a tight 60 pip range. Still, the technical indicators show that the risk remains biased to the upside. In the daily chart, EUR/USD trades above all of its moving averages, with the 20 Simple Moving Average  (SMA) still holding as support. The momentum has softened, but buyers remain in control.

Spain December Preliminary CPI Inflation

• December preliminary CPI YoY +5.8% vs +6.8% prior
• CPI inflation MoM for December +0.3%
• November CPI inflation MoM was -0.1%
• HICP YoY +5.6% vs +6.0% expected
• Prior HICP inflation YoY was +6.7%
• HICP MoM for December +0.1%
• November HICP was -0.3%

That’s now five months running that annual inflation in Spain has been on the decline, since peaking at 10.8% in July. The drop is surely still largely to do with falling energy prices, with milder weather conditions so far this winter being a key reason for that in Europe. If there is something to take away from this report, it is that other countries in the euro area are likely to see a similar trend.

But as inflation starts to cool off in Europe as well, the ECB is starting to give some less hawkish signals as well, which should weigh on the Euro in the coming months. Today we saw that CPI (consumer price index) inflation slowed down as well in Spain, from 6.8% to 6.1%, as Oil prices cool off.

EUR/USD Live Chart