- The EUR/USD currency pair opened this week's trading stable around the 1.0935 level, as it was at the closing price of last week.
- The pair's biggest gains last week reached the 1.0982 resistance level, the highest for the pair in two months.
- Moreover, the performance of the euro dollar and financial markets are awaiting the announcement of US inflation figures this week, which will have a reaction on the future of the US Federal Reserve's tightening policy.
It is likely that inflation in the United States did not decline significantly last month, and retail sales rebounded, which explains why the Federal Reserve is not in a hurry to cut US interest rates. According to economic calendar data, the core Consumer Price Index (CPI), which excludes food and fuel to get a better picture of core inflation, is expected to rise by 0.3% in February compared to the previous month after rising by 0.4% to start the year. On Tuesday, the Labor Department is scheduled to release the US Consumer Price Index report.
The price gauge is expected to rise 3.7% year-over-year, the smallest annual advance since April 2021. While the annual figure is well below the 6.6% peak reached in 2022, the pace of progress has been more modest recently. Obviously, this is consistent with the congressional testimony of US Federal Reserve Chairman Jerome Powell last week, who said that while it is likely to be appropriate to cut US interest rates "at some point this year," he and his colleagues are not ready yet.
This is because the Fed wants convincing signs that inflation is approaching its 2% target, based on a separate measure – the Personal Consumption Expenditures (PCE) Price Index. In addition to the CPI, the government's Producer Price Index (PPI) on Thursday will help determine the PCE, which will be released after the FOMC meeting on March 19-20. Also, Fed officials will observe a blackout period from participating in talks before that meeting. Away from inflation, there are few signs of pressure in the economy. The latest US jobs report pointed to moderate and healthy job growth that should keep consumer spending on track.
Government figures due out next Thursday are expected to show a 0.8% advance in US retail sales for February after a decline of the same size in the previous month. Such a result suggests that shoppers who took a break after a strong holiday shopping season are returning.
Other US data this week includes industrial production for February and the University of Michigan's preliminary consumer sentiment index for March.
In contrast, final inflation figures will be released for Germany, France, and Italy, while industrial activity in the euro zone is expected to decline after two consecutive months of growth. In Russia, inflation is expected to rise to 7.6%, the highest level in twelve months. Other economic data to watch include wholesale prices in Germany, retail sales and foreign trade data in Italy, the consumer confidence index in Switzerland, as well as Turkey's unemployment rate and industrial production numbers.
EUR/USD Technical analysis and forecast:
According to the performance on the daily chart, the price of the currency pair EUR/USD is in the stage of forming an ascending channel. As we mentioned before, the psychological resistance of 1.1000 will remain the most important to confirm the strength and control of the bulls over the trend. If the price of the US dollar continues to decline, the next most important resistance will be 1.1145, from which the technical indicators will move towards strong saturation levels for buying. On the other hand, the support level of 1.0840 will remain the most important for bears to control the trend. The hopes of the current rise have evaporated.
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