EUR/USD pair is facing barricades in extending its recovery above the immediate resistance of 1.0980 in the early European session. The pair has sensed bearish pressure as the US Dollar is seeing some renewed buying interest heading into the critical US CPI data release.
The EUR/USD currency pair has dropped below the 20-day Simple Moving Average (SMA) for the first time since mid-March. While the main trend is still up, the Euro currently lacks strength, increasing the risk of a deeper correction. To open the doors for further gains, the common currency needs to have a daily close above 1.1060 or a firm break of 1.1100.
Ahead of the Asian session, the EUR/USD is showing a bearish bias, but it has found support above 1.0950 and the 200-period SMA on the 4-hour chart. However, a decline below this level could increase the bearish pressure, exposing the next support around 1.0925. If the pair falls below 1.0900, it could trigger volatility and an acceleration to the downside.
The EUR/USD currency pair dropped again on Tuesday, extending its retreat from monthly highs and consolidating below 1.1000. The Euro lagged, despite hawkish comments from European Central Bank (ECB) members. Meanwhile, the US Dollar rose, supported by higher US Treasury yields ahead of crucial data.
ECB members continued to speak about further rate hikes, with Governing Council member Martins Kazaks stating on Tuesday that rate hikes may not be finished in July. Peter Kazimir, another member, warned that they will have to keep raising rates for longer than anticipated. Isabel Schnabel also mentioned that there is more work to do to bring inflation back to target. On Wednesday, Mario Centeno will speak.
The Euro was the worst-performing currency among the G10 space on Tuesday. The final reading of April German Consumer Price Index (CPI) is due on Wednesday, but no surprises are expected. The key numbers will come from the US, with the April Consumer Price Index. The headline is expected to show an increase of 0.4%, an acceleration from 0.1% in March, with the annual rate to stay firm at 5%, while the Core is also seen rising 0.4%, with the annual rate falling moderately from 5.6% to 5.5%.
Markets are wavering ahead of US consumer inflation, which is likely to have an impact on Federal Reserve’s monetary policy expectations. Additionally, the debt ceiling drama will start to gain more attention as time goes by without an agreement. Some consolidation ahead seems likely, considering the centrality of US CPI.