The EUR/USD currency pair is trading just below the 1.0400 level during Friday’s European session, reflecting a cautious market ahead of crucial inflation data from both Germany and the United States. Recent technical indicators suggest that a bearish sentiment may dominate the currency pair’s performance in the near future.
On Thursday, EUR/USD marked its third consecutive day of losses, continuing its downward trajectory into Friday. The anticipation surrounding upcoming inflation reports from Germany and the U.S. has left investors scrutinizing technical signals, which imply a potentially bearish outlook.
In a recent monetary policy meeting, the European Central Bank (ECB) decided to cut key interest rates by 25 basis points, aligning with market expectations. However, there were no significant adjustments to their policy statement, and the ECB President did not provide any new insights into future interest rate decisions, emphasizing that forthcoming choices will be data-driven.
On the other side of the Atlantic, the latest data from the U.S. Bureau of Economic Analysis highlighted that GDP growth for the fourth quarter was recorded at an annualized rate of 2.3%, which fell short of the projected 2.6% growth, following a stronger 3.1% growth in the previous quarter. A note of optimism emerged from a decrease in weekly Initial Jobless Claims, which declined to 207,000 from 223,000 the prior week, lending some strength to the U.S. dollar that pressured the EUR/USD pair further during the American trading session.
Looking ahead, traders will focus on the Consumer Price Index (CPI) data from Germany and the Personal Consumption Expenditures (PCE) Price Index from the U.S. The annual CPI in Germany is expected to remain stable at 2.6%. Conversely, the core PCE is anticipated to rise by 0.2% month-over-month for December, but any unexpected spikes could bolster the U.S. dollar as traders head into the weekend with this key economic data.
From a technical perspective, the Relative Strength Index (RSI) is indicating a bearish trend since it remains below the 50 level. Furthermore, the EUR/USD has closed beneath the 50-day Simple Moving Average for the last three days. Should the pair drop below the 1.0380 – 1.0390 range, further declines towards 1.0350 – 1.0360 and 1.0300 may be anticipated. Conversely, resistance levels are identified at 1.0440, 1.0500 – 1.0510, and 1.0540, which could act as barriers to any upward momentum.
