EUR/USD pulls back as the US dollar strengthens ahead of critical inflation data
2023.05.09 13:27
The pair pulled back on Tuesday as the US dollar strengthened across the board amid a cautious market mood ahead of the highly-anticipated April US consumer inflation numbers to be released on Wednesday.
At the time of writing, the EUR/USD pair is trading at the 1.0960 area, 0.37% below its opening price and recording the second daily decline in a row, having touched a 1-week low of 1.0941.
The EUR/USD pair reached the 1.1090 area last week following the European Central Bank’s (ECB) decision to raise rates on Thursday but was capped ahead of the 1.1100 psychological level and came under pressure at the beginning of the week amid a stronger greenback across the board.
On Wednesday, the US will release Consumer Price Index (CPI) data, which is expected to show consumer annual inflation rate remained steady at 5.0% in April, while the core rate is seen easing to 5.5% in the same period.
Last week, both the Federal Reserve and the European Central Bank raised rates by 25 bps. However, for the next meeting, the Fed is seen pausing while the ECB is expected to increase rates by another 25 bps.
From a technical perspective, the EUR/USD pair holds a short-term neutral to slightly bearish outlook as indicators point lower on the daily chart while the price has fallen below the 20-day SMA but hovers above the longer-term SMAs.
On the downside, the next support area is seen at the 1.0940 area, followed by the 1.0900 psychological level. On the other hand, the following resistance levels could be found at the 1.1050 zone, followed by local highs at the 1.1090-95 area. A break above 1.1100 could pave the way toward 1.1185, last visited in March 2022.
