Will US Inflation Data Spark EUR/USD Recovery?

7 авг. 2023 г.

Will US Inflation Data Spark EUR/USD Recovery?

In Monday's early trading session, the euro showed a slight weakening against the U.S. dollar, influenced by a prevailing sense of pessimism following disappointing industrial production figures in Germany. As the largest economy in the eurozone, Germany's struggles in the manufacturing sector have been evident throughout the year due to decreased orders, sluggish output, and soaring prices.

The EUR/USD pair attempted to recover above the 1.1000 mark, but it seems that sellers are gaining some control in the short term. Traders are now closely eyeing the next potential catalyst for movement in the currency pair, which is the U.S. inflation data set to be released on Thursday at 8:30 am (NY time).

Market expectations point towards a July core inflation rate of 4.7% on an annual basis for the U.S. A significant downside surprise in core inflation, say at 4.5% or lower, might prompt a dovish reassessment of the dollar's value and could open the door for a solid euro recovery.

At present, the EUR/USD is caught between two very tight technical levels after its recent rebound: resistance at 1.1010 and support at 1.1000. If the pair gains further strength, the focus could shift to the 1.1040 level. Conversely, if weakness takes hold, a pullback towards 1.0990 and a retest of 1.09655 may be in the cards.