EUR/USD struggled to break through the 1.0500 level on Monday, remaining in familiar territory at the top of its recent consolidation range. The currency pair’s lack of movement signals ongoing uncertainty in the market as investors digest the latest economic developments.
A rise in US inflation data last week reignited risk aversion, with traders now eyeing the upcoming Personal Consumption Expenditure (PCE) inflation data for further clues on the Federal Reserve’s next moves. The market is hoping that the early-year uptick in US inflation proves to be temporary, and doesn’t trigger further inflationary pressures that could thwart expectations of rate cuts in 2025. However, fears of higher tariffs, especially with President Donald Trump’s renewed threats on trade with Canada and Mexico, are adding pressure on global risk sentiment.
On the European side, the focus is also on inflation, with Germany’s Consumer Price Index (CPI) and Retail Sales figures due later in the week. As a key economic indicator for the broader Eurozone, Germany’s data could influence EUR/USD, but the primary market mover will still be the US PCE inflation report.
EUR/USD Technical Outlook: The pair remains confined near the 50-day Exponential Moving Average (EMA) at around 1.0435, with price action struggling to gain momentum above the 1.0500 level. The price continues to trade within a rough wedge pattern, with daily candles closing inside the formation without significant moves in either direction.
Despite a dip below 1.0200 in mid-January, bullish momentum has been limited, as EUR/USD remains well below the key 200-day EMA at 1.0650. Traders will be watching for any breakouts from the current range, with a decisive move above 1.0500 or below 1.0400 potentially setting the tone for the next directional move.
In the near term, the pair seems to be in a holding pattern, awaiting further economic data, particularly the US PCE inflation report, to provide clearer guidance for the next phase of price action.
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