The EUR/USD currency pair surged to 1.0850 on Friday after the release of hotter-than-expected Eurozone inflation data. This unexpected rise in inflation might impact the European Central Bank’s (ECB) future rate-cut plans.
Market Movers:
- Eurozone HICP: Eurostat reported that annual Eurozone inflation accelerated in May, with headline HICP at 2.6% and core HICP at 2.9%, exceeding expectations.
- ECB Rate Cut Expectations: While a rate cut in June is still anticipated, the higher inflation figures could lead the ECB to adopt a more cautious approach to subsequent rate cuts.
- US PCE Data Release: Investor focus has shifted to the upcoming US core PCE data release at 12:30 GMT, which will influence expectations for potential Fed rate cuts in September.
Technical Analysis:
- EUR/USD Breakout: The EUR/USD pair has rebounded significantly from the 1.0800 level and holds the breakout of a symmetrical triangle chart pattern.
- Uncertain Near-Term Outlook: Despite the uptick, the pair struggles to stay above short- and long-term EMAs, indicating near-term uncertainty.
- Resistance and Support: Regaining the two-month high near 1.0900 could signal further strengthening for the Euro. A break above this level could lead to gains towards 1.0950 and 1.1000. Conversely, a fall below the 200-day EMA at 1.0800 could trigger a downside move.
Overall:
The hotter-than-expected Eurozone inflation data has injected volatility into the EUR/USD pair. While the Euro has strengthened in the short term, the future trajectory will depend heavily on the upcoming US PCE data. A strong US inflation reading could weaken the Euro, while a softer figure could lead to further Euro gains. Investors should be prepared for further fluctuations in the market as key data releases unfold.
