The EUR/USD exchange ended the week in a tight range after the US published a strong inflation report, raising concerns about the Federal Reserve’s next move. The pair was trading at 1.1817, a few points above last week’s low of 1.1745.
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US Inflation Data and Geopolitics to Determine Next Move
The EUR/USD pair remained in a tight range after the US published a higher inflation report. Data released on Friday showed that the Producer Price Index (PPI) jumped from 0.4% in December to 0.5% in January. This increase led to an annual move from 3.3% to 3.6%.
The core PPI inflation report moved from 0.6% to 0.8% on a MoM basis and from 3% to 2.9%. These numbers mean that inflation is still a major concern in the United States. As such, there is a risk that the Federal Reserve may not cut interest rates as soon as analysts were expecting.
US inflation may remain at an elevated level in the coming months now that a new war has started in the Middle East. Israel and Iran bombed key sites in Iran on Saturday, leading to a major retaliation by Iranian forces. The new war will likely lead to higher crude oil prices as oil ships are avoiding the Strait of Hormuz.
The EUR/USD pair also reacted to the latest European inflation report. Data by the German statistics agency showed that the headline Consumer Price Index (CPI) dropped from 2.1% in January to 1.9% in February.
Looking ahead, the US will publish the latest non-farm payrolls data on Friday. These numbers will provide more information on what to expect in the coming meetings. Economists expect the data to show that the unemployment rate remained unchanged at 4.3% in February as the economy added over 60k jobs.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair was flat on Friday. It was trading at 1.1817, a few points above last week’s low of 1.1743. It has also rebounded above the 50-day Exponential Moving Average (EMA).
At the same time, the pair has formed a falling wedge pattern, which is made up of two descending and converging trendlines. Also, the Relative Strength Index (RSI) and the MACD have pointed upwards.
Therefore, the pair will likely be highly volatile on Monday as investors assess the impact of the ongoing war in Iran and its impact on the market. The key support and resistance levels to watch will be at 1.1700 and 1.2000.
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