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Euro Latest: EUR/USD in Critical Zone, Muted Reaction to EU CPI

Euro Latest: EUR/USD in Critical Zone, Muted Reaction to EU CPI

Justin McQueen, Analyst

EUR/USD Price Analysis & News

  • EU CPI to 2% Likely Overlooked by ECB
  • ECB Doves Dampen PEPP Taper Expectations
  • EUR/USD To Take Cue From Key US Data

Eurozone CPI: Euro Area inflation rose to 2% in May, up from 1.6% in the prior month and above the 1.9% expected. The largest factor behind the gain had been energy prices, which rose 13.1%. The core reading hit 0.9%, printing in line with estimates. While the headline hitting 2% would normally be viewed as significant from a monetary policy view, given the variety of transitory factors and base effects at play, the data is largely considered noise at this point and therefore will likely be overlooked at the upcoming ECB meeting.

Euro Latest: EUR/USD in Critical Zone, Muted Reaction to EU CPI

Source: Refinitiv

The CPI and Forex: How CPI Data Affects Currency Prices

ECB Doves Dampen PEPP Taper Expectations

Ahead of the ECB meeting on June 16th, ECB doves have been out in force to talk down the prospects that the central bank could adjust the pace of PEPP purchases throughout Q3. In turn, this has taken some of the shine from the Euro, which failed to make a convincing break above topside resistance at 1.2240-45.

Recent ECB commentary

  • ECB’s Panetta: The conditions that we see today do not justify reducing the pace of purchases, and a discussion above phasing out the PEPP is still clearly premature.
  • ECB’s Villeroy: Any hypothesis of a reduction of purchases partly for Q3 or the following quarters is purely speculative.
  • ECB’s Stournaras: Sees no reason to change the pace of PEPP purchase programme.

EUR/USD Price Action to be Dictated by Key US Data

Taking a look at the chart, trendline support remains the key focus and while the pair broke below on Friday’s session, failure to close below sees Euro bears remaining patient for now. That said, bullish momentum has eased slightly and with a plethora of key data releases (mainly from the US) for markets to digest, a trend will likely be established by the end of the week.

Pivot

S1

S2

S3

R1

R2

R3

1.2213

1.2194

1.2164

1.24

1.2243

1.2262

1.2280

Trading with Pivot Points

EUR/USD Chart: Daily Time Frame

Euro Latest: EUR/USD in Critical Zone, Muted Reaction to EU CPI

Source: Refinitiv

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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