The beginning of this week’s trading was not much different from the end of last week’s trading, where the price of the EUR/USD currency pair settled around and above the psychological resistance 1.1000. This level still supports the bulls’ control over the trend. The pair jumped yesterday towards the resistance 1.1054, before settling around the 1.1025 level at the time of writing. The currency pair may remain stable around its recent gains until the reaction to the US inflation figures this week.
In contrast Eurozone inflation still has "a good deal of momentum", although it is moderate, according to ECB chief economist Philip Lane. Price gains have eased from double-digit peaks and fundamental pressures eased in April for the first time in 10 months, allowing the European Central Bank last week to slow the pace of unprecedented interest rate increases.
"There's still a lot of momentum in inflation, but later this year, and a lot of that inflation should reverse, partly because of the reversal of fundamental shocks, partly because of monetary policy," Lin added to a panel on Monday in Berlin. “There is a lot of inflation coming later in the year,” he added. “There is still momentum in food prices and core inflation, which this year is going in the opposite direction to the decline in energy inflation.”
For its part, the European Central Bank said it still sees "significant upside risks" to inflation expectations, which currently envisage a 2% target in the second half of 2025. Most economists expect two more quarter-point rate hikes, in June and July.
For his part, Dutch Central Bank President Claes Nott said ahead of this week's trading that borrowing costs should be raised "as long as underlying inflation is not curbed." Others including France's François Villeroy de Gallo expressed similar views, while Italy's Ignazio Fiesco, considered more pessimistic, said the ECB was about to peak in rates.
For its part, Bloomberg Economics says that price growth may return to the target without stressing the economy too much. "With headline inflation back on its downward trajectory, our analysis shows that wage gains will moderate," said Jamie Rush, chief European economist, in a report. And “the companies’ opportunities to make a profit will also vanish.”
Euro predictions against the dollar today:
- There is no change in my technical view of the performance of the price of the EUR/USD currency pair, pending a strong reaction to the performance.
- So far, according to the performance on the daily chart below, the general trend of the currency pair is still bullish.
- The stability is around and above the psychological resistance 1.10, which supports it.
- Breaching the last peak 1.1092 will motivate the bulls to move higher, and at the same time push the technical indicators towards strong overbought levels.
On the other hand, and over the same period of time, it will be important to move towards the support levels 1.0955 and 1.0880 to start changing the general trend downwards. As I mentioned above, the currency pair will remain in its current path until the reaction to the US inflation numbers.
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