EUR/USD Holds Above $1.10 as ECB and U.S. Inflation Data Shape Market Sentiment
Arslan Butt•Thursday, September 12, 2024•2 min read
The EUR/USD pair is currently trading around $1.10176, consolidating within a narrow range near the lower boundary of a descending channel.
The pair has struggled to gather upward momentum, remaining under its 50-period EMA at $1.10403, which reinforces the prevailing bearish sentiment. Market participants are awaiting several key economic releases that could provide clarity on the short-term direction of the pair.
Released Events: U.S. Inflation Data and German Bond Auction
On Wednesday, the U.S. Consumer Price Index (CPI) data showed inflation largely in line with expectations, with the core CPI m/m rising by 0.3%, slightly above the forecast of 0.2%. The annual CPI y/y also showed cooling inflation, coming in at 2.5%, down from 2.9% in the previous month. These numbers reinforced the market’s expectation that the Federal Reserve will likely ease its monetary policy, but not as aggressively as some investors had anticipated.
🔘The #euro falls against the #dollar after data showed U.S. core #inflation unexpectedly accelerated in August compared to July. Core inflation rose 0.3% month on month in August after July's 0.2% increase. #EURUSD falls to $1.1005 after the data, from $1.1042 beforehand. Trade… pic.twitter.com/3nhiB6ST5G
Meanwhile, Germany’s 10-year bond auction recorded an average yield of 2.11%, compared to the previous auction’s 2.22%, reflecting a slight decrease in borrowing costs. This sign of easing inflation in Germany has further cemented expectations for a less hawkish stance from the European Central Bank (ECB), which could affect EUR/USD performance in the short term.
U.S. crude oil inventories rose by 0.8 million barrels, following a massive drawdown of 6.9 million barrels last week. The rising inventories indicate potential cooling in demand, which could put downward pressure on the U.S. dollar, indirectly benefiting EUR/USD.
Upcoming Major Events: ECB Decision, PPI, and U.S. Unemployment Claims
On Thursday, the European Central Bank (ECB) will take center stage with its monetary policy decision. The market is expecting the ECB to keep its main refinancing rate unchanged at 3.65%, down from 4.25%. Investors will be keenly watching the ECB’s Monetary Policy Statement and subsequent press conference for insights into the bank’s stance on future rate hikes or cuts. ECB President Christine Lagarde’s comments could be pivotal in determining the short-term trajectory of EUR/USD.
Later in the day, the U.S. will release its Producer Price Index (PPI) data, expected to show a modest 0.2% increase in core PPI m/m. This follows a flat reading last month, and any surprises here could influence the Fed’s inflation outlook and, by extension, the U.S. dollar. Additionally, U.S. unemployment claims are expected to remain steady at 227K. Any deviation from this figure could create volatility in the market.
In terms of technical levels, EUR/USD finds immediate support at $1.10019, and a break below this could lead to further downside toward $1.09767 and $1.09505.
On the upside, a move above $1.10403, which corresponds to the 50-period EMA, would be necessary for the pair to challenge higher resistance levels, potentially targeting $1.10660 and $1.10906.
The RSI currently sits at 43.60, indicating mild bearish momentum, but the pair is not yet in oversold territory, leaving room for additional downside. The market remains in wait-and-see mode ahead of key economic data and central bank events.
Conclusion: Waiting for ECB and U.S. Data for Direction
Overall, EUR/USD remains under pressure but is holding above the key $1.10000 level for now. Market participants are awaiting clarity from the ECB’s monetary policy decision and the U.S. PPI and unemployment claims data.
These events are likely to shape the pair’s short-term direction, with a breakout from the current range potentially setting the tone for the next major move.
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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