The decline in EUR/USD began on the back of a rise in the dollar but the dynamics have changed. This week, the single currency is broadly weaker while the greenback has lost its upward momentum against major currencies other than the euro.
Fed Chair Powell held his stance in testimonies to Congress that took place Tuesday and Wednesday, confirming that the Fed is not looking to cut rates any time soon. Nevertheless, the money markets continue to price in another rate cut in the second half of the year.
Consumer prices in Germany were reported to decline by 0.6% in January and rise 1.7% on an annual basis. Energy prices recovered from a prior fall in December while the price of education declined notably. Excluding energy, the inflation rate came in at 1.5% in the year to January.
Later in the trading session today, CPI data will be released from the US. Analysts are expecting both the core and headline figures to reflect a 0.2% rise last month.
A record number of deaths related to the Coronavirus were reported on Wednesday, a drastic shift from the day prior when cases reported was the lowest in two weeks. Risk assets have reacted with the S&P 500 easing lower from recent highs. A sustained shift in risk sentiment will tend to underpin the euro.
The decline in EUR/USD yesterday reaffirmed that the downtrend remains intact, despite reaching oversold conditions earlier in the week. A next potential target to the downside might be 1.0833, although the pair is showing some signs of recovering in the early day.
The break below 1.0897 was significant as the level reflected the lowest daily close in 2019. For the session ahead, the price point is seen as major resistance. While below it, the focus will tend to remain to the downside. An upside break targets resistance at 1.0940
- EUR/USD declined to lows not seen since May 2017 as the euro continues to post losses against all of its major counterparts.
- The pair entered oversold territory this week, however, a break above 1.0897 is needed to signal a potential recovery.
This article was originally posted on FX Empire
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