Forex Opinion & Analysis

Euro Climbs to 5-Week High Ahead of US CPI Data

The EUR/USD pair reached a five-week high at 1.0822, buoyed by positive market sentiment ahead of today's crucial US Consumer Price Index (CPI) data release. The report is expected to show a 0.3% month-on-month increase in inflation for April, a slight decrease from the 0.4% rise in March.

Federal Reserve Chair Jerome Powell recently provided a confident assessment of the US economy, predicting above-trend GDP growth and a decline in inflation. Despite some recent data that has slightly challenged this optimism, Powell's outlook remains resilient.

This year's unexpected surge in US consumer prices has led to a revision in the Fed's interest rate cut forecasts, with the market now anticipating a 45-basis point reduction by the end of 2024.

Investor expectations have significantly shifted throughout the year. They anticipated six rate cuts at the beginning of 2024, but now they only foresee a maximum of one by May. The Fed's future decisions depend heavily on ongoing price trends and inflation forecasts.

EUR/USD Technical Analysis

On the H4 chart, the EUR/USD has formed a consolidation range around 1.0785. With an upward exit from this range, a continuation of the correction is expected. The growth to 1.0827 has already been achieved, and a retraction to 1.0805 (testing from above) is anticipated today.

Subsequent developments may lead to an increase towards 1.0844. This growth pattern from the level of 1.0601 is viewed as a correction to the last decline wave. Following its completion, a new wave of decline to 1.0600 is expected. This scenario is technically supported by the MACD indicator, with its signal line above zero and directed upwards, although histograms are at maximums and preparing for a decline.

On the H1 chart, after reaching 1.0805, a consolidation range was established above this level. Following an upward breakout, the price moved to 1.0827. Once this level is tested, a potential decline to 1.0805 (testing from above) could occur, leading to further growth towards 1.0844. The Stochastic oscillator confirms this technical outlook, with its signal line currently above 80. A decline to 50 followed by a rebound to 80 is expected, then a potential drop to 20, indicating upcoming fluctuations.

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