EUR/USD Slips to $1.17 as ECB Holds Rates, CPI Shock Tests Dollar Momentum
EUR/USD extended its pullback during the European session, trading near $1.1710, marking a fourth consecutive daily decline...
Quick overview
- EUR/USD has experienced a fourth consecutive daily decline, trading near $1.1710, but remains close to weekly levels after a recent rally.
- The European Central Bank maintained interest rates at 2.0%, with President Lagarde indicating that discussions on rate hikes are premature.
- US inflation data showed a cooling trend, with November CPI at 2.7%, but market reactions were cautious due to potential seasonal distortions.
- Germany's consumer confidence index fell sharply, adding pressure on the euro, while technical indicators suggest EUR/USD is in a consolidation phase.
EUR/USD extended its pullback during the European session, trading near $1.1710, marking a fourth consecutive daily decline. Despite the slide, the pair remains close to weekly levels after rallying nearly 2% over the past three weeks, suggesting consolidation rather than trend exhaustion.
The euro came under pressure after the European Central Bank left interest rates unchanged, a decision widely anticipated by markets. ECB President Christine Lagarde said the move was unanimous and stressed that discussions around rate hikes were premature.
According to the ECB, the deposit rate remains at 2.0%, while growth projections were revised higher to 1.4% for 2025 and 1.2% for 2026. Still, policymakers emphasized flexibility, leaving future policy moves dependent on incoming data.
US Inflation Data Cools Dollar Upside
Across the Atlantic, US inflation data added complexity to the outlook. November CPI eased to 2.7% year on year, below the 3.1% consensus, while core inflation slowed to 2.6%, according to figures from the US Bureau of Labor Statistics. The data reinforced expectations that inflation pressures are cooling.
However, markets reacted cautiously. The Commerce Department noted that CPI inputs covered only part of the Black Friday period, raising questions about seasonal distortions. As a result, near-term dollar weakness has been measured rather than decisive.
Germany Data Adds to Euro Headwinds
Germany’s data flow further weighed on the euro. The GfK Consumer Confidence index fell sharply to -26.9 for January, missing expectations. Factory-gate pressures also remained weak, with producer prices down 2.3% year on year, underscoring sluggish domestic demand. Later today, Eurozone consumer confidence is expected to edge up slightly, but sentiment remains fragile.
EUR/USD Technical Outlook and Levels
From a technical perspective, EUR/USD is trading near $1.1714, holding within a rising structure on the 4-hour chart. Price is testing a rising trendline aligned with the 50-EMA at $1.1715, while the 100-EMA near $1.1680 continues to slope higher, keeping the broader bias constructive.
Momentum has cooled, with RSI near 45, signaling consolidation rather than a breakdown.
Key levels to watch include:
- Support: $1.1700, then $1.1645 (Fibonacci support)
- Resistance: $1.1745, followed by $1.1780
As long as trend support holds, EUR/USD appears to be pausing rather than reversing.
Trade idea: Buy dips near $1.1680, target $1.1760, stop below $1.1640.
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