EUR Weaker After Data
EURUSD is trading on a softer footing on Tuesday against the backdrop of a higher US Dollar today and weakness in the latest Eurozone inflation data. Headline Eurozone CPI was seen falling to 1.9% last month, down from 2.2% prior and below the expected 2% level which is also the ECB’s inflation target. This is the first time we’ve seen headline Eurozone CPI below the ECB’s target since Q3 2024.
ECB In Focus This Week
Core CPI remained a little firmer at 2.3% but was down sharply from the prior month’s 2.7% level and below the 2.4% the market was looking for. On the back of recent rate cuts from the ECB, the data has put fresh focus on near-term easing expectations, opening the path for a weaker EURUSD if the ECB cuts this week as expected. Given these expectations, the market will now be looking for a more dovish set of guidance from the bank. In this scenario, EUR has room to weaken given the strength we’ve seen over recent months. However, if the ECB doesn’t follow through on dovish guidance, EURUSD might avoid falling regardless of a further rate cut at this point.
US Jobs Data
Looking ahead, focus will now be on US jobs data through the remainder of the week with the JOLTS number today, ADP tomorrow and the headline NFP set on Friday. If we see a cut and dovish guidance from the ECB alongside any upside surprises in US jobs data, this could see EURUSD pulling back sharply. However, any fresh downside in US jobs is likely to take focus away from ECB dovishness, keeping the pair underpinned near-term.
Technical Views
EURUSD
The rally in EURUSD has stalled for now ahead of the 1.1503 level. With momentum studies bullish, focus is on a continued push higher and an eventual breakout towards 1.1669 next. To the downside, below 1.1209, 1.0931 will be the next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.