EUR/USD Forecast: Euro Ticks Up Ahead of US Inflation

• Traders are eagerly awaiting the US inflation report.

• After this month’s policy meeting, there has been a moderation in the Fed’s hawkish stance.

• ECB President Christine Lagarde suggested that inflation could rise in the coming months.

In anticipation of the eagerly awaited US inflation data, traders witnessed a boost in the euro, contributing to a cautiously optimistic EUR/USD forecast. This data, expected later this week, is crucial for assessing whether the Federal Reserve needs to take further actions to curb inflationary pressures.

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Notably, there has been a moderation in the Fed’s hawkish stance after this month’s policy meeting. Consequently, there is keen interest in whether the battle against inflation is still on.

Furthermore, more Fed speakers are set to address the public this week. They might echo Chair Powell in keeping the possibility of further rate hikes open. Even if the CPI shows a softer print, Simpson believes the Fed will continue to dampen hopes for rate cuts, especially while inflation remains above the target.

Meanwhile, ECB President Christine Lagarde suggested that inflation could rise in the coming months. However, maintaining current interest rates for several quarters could still bring price growth back to 2%. Moreover, Lagarde anticipated a resurgence of higher numbers.

The ECB left its deposit rate unchanged at 4% last month and projected inflation reaching the target only in late 2025. Meanwhile, consumer price growth could stay around 3% for most of 2024. Still, Lagarde hinted that another rate hike may not be necessary even if inflation increases.

EUR/USD key events today

Given the lack of significant economic releases from the US and the Eurozone, the pair will likely consolidate.

EUR/USD technical forecast: Bulls test new downtrend at the 30-SMA.

The EUR/USD price is facing the 30-SMA resistance. This comes after a shift in sentiment where the price crossed below the SMA and the RSI below 50. The price is currently retesting the SMA as bulls test the strength of the new bearish move. The bearish move will continue if the SMA holds firm as resistance. 

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Moreover, if the price fails to go above the SMA, it will likely break below the 1.0665 support to make a lower low. However, if bears fail the test and the price returns above the SMA, it will probably climb to the 1.0751 resistance level.

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