EUR/USD Holds $1.1110 After US CPI Miss—Is a Break Toward $1.1275 on the Table?
EUR/USD is stabilizing around $1.1110 after bouncing off the monthly low of $1.1065. The pair had been under pressure due to US dollar...
Quick overview
- EUR/USD is stabilizing around $1.1110 after bouncing off a monthly low of $1.1065, influenced by US dollar strength and recent inflation data.
- Softer-than-expected US inflation data has eased Fed tightening fears, providing a short-term boost to the euro.
- The euro faces pressure from expectations of an ECB rate cut in June and ongoing trade tensions between the US and EU.
- Technically, EUR/USD is holding above key support levels, with potential targets for bulls set at $1.1198 and $1.1275.
EUR/USD is stabilizing around $1.1110 after bouncing off the monthly low of $1.1065. The pair had been under pressure due to US dollar strength caused by a hawkish Fed and a temporary tariff truce between Washington and Beijing.
But softer-than-expected US inflation data today has cooled off immediate Fed tightening fears and given the euro some room to breathe.
April’s CPI showed a 0.2% monthly increase versus the expected 0.3% and 2.3% year-over-year inflation versus the projected 2.4%. Core CPI also softened to 0.2% month-over-month.
This means inflation is decelerating and that might reduce the need for future rate hikes. The dollar dipped on the news and that’s giving the euro a short-term boost.
US-China Truce and Fed Caution Previously Lifted USD
Earlier this week the dollar was boosted after the US and China agreed to a 90-day tariff reduction in Geneva. The US reduced additional tariffs to 10% and China cut tariffs to 30% but fentanyl-linked tariffs remained in place.
Fed officials including Chicago Fed President Austan Goolsbee said the economic impact of tariffs was now manageable and that’s less urgency for rate cuts.
This was weighing on EUR/USD and the euro was further hurt by dovish ECB rhetoric and renewed EU-US trade tensions.
ECB Easing Prospects and Trade Frictions Weigh on Euro
The euro is still constrained by the expectation of an ECB rate cut in June. Officials are still saying disinflation is progressing and that inflation could fall to 2% by year-end. Markets are now fully pricing in a rate cut in the next month.
Adding to the euro’s woes, Brussels has put the threat of retaliatory tariffs against the US and published a consultation paper outlining €95 billion in potential countermeasures. This is increasing uncertainty for the Eurozone’s export-heavy economy and making it harder for the euro to recover.
EUR/USD Technical Outlook
EUR/USD holds $1.1065, bulls target $1.1198Technically EUR/USD is holding above key support at $1.1065-$1.1120 which is a consolidation and trendline area. The MACD is flattening and that means bearish momentum is slowing down.
Trade:
Buy: $1.1100-$1.1125
Target 1: $1.1198
Target 2: $1.1275
Stop: Below $1.1060
A break above $1.1190 could take it higher to $1.1275. Failure to hold above $1.1060 would mean the recovery is invalid and downside risk to $1.0998.
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