Euro’s Performance Against the US Dollar
The Euro has adjusted slightly from its session highs, currently trading at 1.1815 against the US Dollar (USD). As the day progressed, we observed minor losses on the daily chart, indicating fluctuations in the currency’s value. Recent data from the Eurozone’s preliminary Harmonized Index of Consumer Prices (HICP) points to diminishing inflationary pressures, alongside a revision in the region’s service activity growth.
Consumer Inflation Trends
January’s preliminary Eurozone HICP figures showcase a significant drop in consumer inflation, reaching a 16-month low of 1.7%, down from 2% in December. However, core inflation—an essential indicator for monetary policy—has remained steady, which suggests that underlying inflation pressures might still be present. Additionally, producer prices have shown a contraction that is slightly less severe than expected, preventing the Euro from falling deeper.
US Dollar Stability and Government Actions
The US Dollar is maintaining its stability as markets adjust to political developments. Recently, President Trump signed a bill to end a two-day government shutdown, improving market sentiments. This comes amidst the positive news of Kevin Warsh being appointed as the new Federal Reserve Chairman, expected to take a cautious approach regarding rate cuts while emphasizing the central bank’s independence.
Market Sentiment Ahead of Key Reports
On Friday, investors are in a cautious mood, particularly anticipating the upcoming ADP Employment Change report, set to be released later. This report is critical as the key Nonfarm Payrolls report has been postponed due to the recent government shutdown, making the ADP data an important indicator for employment trends in the US.
Eurozone’s Economic Indicators: Services and Inflation
Recent data from Eurostat highlighted a decline in yearly inflation rates, prompting concerns about the Euro’s stability. The HICP showed inflation easing to 1.7% in January, while core inflation maintained a steady rate of 2.3%. Additionally, the Producer Price Index (PPI) contracted by 0.3% in December, contributing to uncertainty regarding business activity within the Eurozone’s key economies.
Technical Analysis of EUR/USD
The technical indicators for EUR/USD signal a potential recovery from the lows observed on Monday at 1.1775. The Moving Average Convergence Divergence (MACD) line is on the verge of crossing above the signal line—a bullish indication. The Relative Strength Index (RSI) is situated just below the 50 line, hinting at the need for a breakout for a confirmed bullish trend.
Outlook and Significant Price Levels
For a true recovery to be established, the EUR/USD will need to break above the crucial resistance level at 1.1875. Success in surpassing this level could pave the way for prices to aim toward the resistance range between January 29’s high of 1.1995 and the psychologically significant 1.2000 threshold. Conversely, immediate support remains around the February 2 and 3 lows near 1.1775, with additional support residing at the January 21 low of approximately 1.1660.
