- EUR/USD falls 0.29% after US PCE inflation report shows expected slowdown, reversing early gains.
- Soft German inflation and lower Eurozone yields contribute to the pair’s decline from daily highs.
- Fed officials’ comments on future rate cuts influence market sentiment, with focus on economic data.
The trajectory of EUR/USD shifted on Thursday following a report from the United States indicating a marginal uptick in inflation. Initially, this led to a rally, propelling the pair to a daily peak of 1.0855. However, the momentum proved short-lived, and the pair retreated to 1.0807, experiencing a 0.29% decline.
EUR/USD drops as EU’s yields fall and German inflation report weighs
The recent inflation report from the US Bureau of Economic Analysis (BEA) unveiled that the Personal Consumption Expenditure (PCE) Price Index, in line with expectations, decelerated from 2.6% to 2.4% YoY. Simultaneously, the Core PCE, a preferred inflation gauge of the Federal Reserve excluding volatile items, showed a 2.8% YoY increase, slightly below December’s 2.9%, aligning with market expectations.
This data prompted an upward movement in the EUR/USD pair, breaking through the crucial resistance at the 200-day moving average (DMA) situated at 1.0828, reaching a daily high. However, the pair retraced from these levels as yields dipped across the Eurozone (EU), coupled with a softer-than-expected inflation report from Germany during the European session.
Meanwhile, housing data released by the National Association of Realtors showed a decline in Pending Home Sales from 5.7% MoM in January to -4.9%. Concurrently, the Chicago PMI for February came in at 44.0, falling short of the consensus of 48.0 and the prior reading of 46.
Fed speakers grab the headlines
In the meantime, Atlanta’s Fed President Raphael Bostic commented that economic data should guide the Fed on when to begin to start rate cuts, which, according to him, could happen in the summer. Bostic acknowledged that inflation is slowing down, but they have to stay “vigilant and attentive.”
Chicago’s Fed President Austan Goolsbee said that policy is restrictive, and the question is, “How long do we want to remain restrictive.”
EUR/USD Price Analysis: Technical outlook
The movement of the EUR/USD on Thursday has created an opportunity for bearish momentum, paving the way for a dip below both the 200-day and 100-day moving averages (DMAs) and a break of a supportive trendline. A violation of the latter might instigate a retracement, potentially reaching as far as the October 3 low of 1.0448. Conversely, should buyers defend the 1.0800 level, the currency pair could consolidate within the 1.0800-1.0850 range.
