EUR/USD Price Analysis: Euro Slides on Easing German Inflation

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  • Inflation in Germany, the largest Eurozone economy, rose by a slower 2.7% on an annual basis.
  • Economists believe underlying Eurozone inflation remains stubborn.
  • Bets for a Fed rate cut in June rose to 66%.

Friday’s EUR/USD price analysis revealed a bearish sentiment, driven by the emerging signals of inflation easing in the Eurozone. The prospect of a decline in inflation could prompt the European Central Bank to consider starting interest rate cuts. Meanwhile, inflation in the US also showed signs of easing on an annual basis. 

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Inflation in Germany, the largest Eurozone economy, rose by a slower 2.7% on an annual basis in January. This was in line with economists’ expectations and indicated that inflation in the larger bloc might show a decline. However, economists believe underlying inflation remains stubborn. 

Notably, the decline in German inflation came from cheaper energy prices. However, figures excluding food and energy prices revealed a much slower decline in inflation. It is for this reason that the ECB has pushed back expectations for rate cuts.

On the other hand, the dollar was steady after the US PCE price index report showed an increase in price growth in January. Still, the annual figure showed a gradual easing in inflation. As a result, bets on a Fed rate cut in June rose to 66%.

Another report revealed that jobless claims in the US rose last week, indicating softness in the labor market. Additionally, continuing claims have risen in the past month, which could indicate an increase in unemployment rates. Traders will now await the nonfarm payroll report next week for guidance on the Fed’s rate cut timing.

EUR/USD key events today

  • US ISM manufacturing PMI
  • US consumer sentiment

EUR/USD technical price analysis: Consolidating within the 1.0800-1.0850 range

EUR/USD technical price analysis
EUR/USD 4-hour chart

On the charts, EUR/USD is consolidating, with support at 1.0800 and resistance at 1.0850. However, within this range area, bears are in control as the price sits below the 30-SMA with the RSI below 50.

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The previous bullish move paused at the 1.0850 resistance level, where price action indicated a looming reversal. The bulls tried on several occasions to break above the resistance but failed, making large wicks. Meanwhile, the bears got stronger and broke below the 30-SMA. Therefore, the price might soon break below 1.0800 to retest the 1.0700 support level.

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