The EUR/USD pair was flat as the price of crude oil continued soaring this week.
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The EUR/USD exchange rate was flat ahead of the upcoming European consumer inflation, US housing starts, and the Federal Reserve decision. It was trading at 1.0678 on Tuesday morning, a few points above last week’s low of 1.0628.
European inflation data
The EUR/USD pair was flat as the price of crude oil continued soaring this week. Brent, the global benchmark, rose to $94.37 while the West Texas Intermediate (WTI) jumped to $91.60.
Oil prices have been rising after Saudi Arabia and its OPEC+ allies decided to continue with the supply cuts for the remainder of the year. Demand is also at an elevated level, with the International Energy Agency (IEA) estimating an average daily consumption of over 101 million barrels.
The rising crude oil prices mean that inflation will stay high for a while. Data published last week showed that the headline US inflation rose to 3.7% in August, the biggest increase since 2021.
Therefore, there is a likelihood that the Fed and other central banks will maintain a hawkish tone for a while. In its decision last week, the ECB decided to hike rates by 0.25% to a record high of 4%.
The main mover for the EUR/USD pair will be Wednesday’s Federal Reserve decision. Economists believe that the bank will deliver a hawkish pause where it leaves rates unchanged and hints towards future increases.
The key economic data to watch on Tuesday will be Europe’s inflation and current account numbers. The initial estimates showed that the headline CPI rose by 0.6% from July and by 5.3% from a year earlier as energy costs jumped. Core inflation rose from -0.1% to 0.3% during the month.
While these numbers are important, their impact on the pair will be minimal since the ECB already made its decision. The US will publish August’s building permits and housing starts data.
EUR/USD technical analysis
The EUR/USD pair has been in a strong bearish trend in the past few months. In this period, it formed a descending channel, signaling that bears are in control. It has now retested the important resistance at 1.0685, the lowest level on September 7th. The pair has also moved slightly below the 50-day moving average.
Therefore, the EUR/USD exchange rate will likely resume the bearish trend ahead of the upcoming Fed decision. The target to watch will be 1.0600.