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Selling the Jump in EUR to USD After Weak German CPI Inflation

The rate of EUR to USD has been declining for about a month, however we saw a retrace higher today, which has presented us with a good opportunity to open a sell EUR/USD signal. This forex pair has climbed more than 50 pips, but is finding resistance at moving averages which have been pushing it lower, so we think that the larger downtrend will resume again soon.

EUR/USD Chart H4 – The 20 SMA Providing Resistance

EUR/USD has been declining since the second week of March, partly due to signals from the Federal Reserve suggesting a less dovish stance than previously anticipated, with odds of a June FED rate cut declining further below 60% now. Additionally, the European Central Bank (ECB) is expected to begin rate reduction, especially after the Swiss National Bank’s recent 25 basis point rate cut.

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The pair has now fallen below the 1.08 level, and the 20 SMA (gray) is acting as resistance on the H4 chart, indicating potential further declines, possibly toward the 1.07 level. Yesterday’s improvement in ISM manufacturing contributed to further downward pressure on EUR/USD, sending it to 1.0720s. Today we saw a retreat higher after the JOLTS jobs numbers, but the 20 SMA has topped the climb so we are shorting this pair. But the situation remains bearish for the EUro, with German regional CPI inflation continuing to fall, as shown below.

German Regional CPI Inflation for February

  • Bavaria CPI: +2.3% year-on-year (y/y) compared to +2.6% y/y in the prior period.
  • Hesse CPI: +1.6% y/y compared to +2.1% y/y in the prior period.
  • North Rhine Westphalia CPI: +2.3% y/y compared to +2.6% y/y in the prior period.
  • Saxony CPI: +2.5% y/y compared to +3.0% y/y in the prior period.
  • Brandenburg CPI: +2.8% y/y compared to +3.5% y/y in the prior period.
  • Baden-Wuerttemberg CPI: +2.3% y/y compared to +2.7% y/y in the prior period.

Overall, these readings suggest that headline annual inflation in March softened compared to February across various regions in Germany. Based on these regional CPI figures, it is estimated that the national reading for March will be around 2.0% to 2.1%, slightly lower than the estimated 2.2% reading.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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