EUR/USD Price Analysis: Euro Gains Despite Downbeat Inflation

• Producer prices in Germany fell by 3.3%, beating forecasts for a drop of 3.1%.

• Inflation in the Eurozone fell from 2.6% to 2.4% in March.

• Markets are pricing in 65 basis points of ECB rate cuts this year.

The EUR/USD price analysis shows solid bullish sentiment as the euro strengthens despite weaker inflation in the Eurozone. The rally comes amid dollar weakness as investors digest recent economic releases from the US. 

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Data on Tuesday revealed that producer prices in Germany fell by 3.3%, beating forecasts for a drop of 3.1%. Producer inflation held at 0.2% for the month, missing estimates of 0.3%. Inflation in the Eurozone has consistently trended lower. It fell from 2.6% to 2.4% in March, edging closer to the central bank’s target. As a result, investors and policymakers are more confident that the ECB will start cutting rates in June, well ahead of the Fed. 

However, ECB policymakers like Isabel Schnabel have called for caution after the June cut. Nonetheless, markets are pricing in 65 basis points of rate cuts this year. Investors will now wait for the Eurozone PMI reports coming on Thursday for more clues on the ECB’s policy outlook. 

Meanwhile, the dollar remained vulnerable after data revealed cracks in the economy last week. High borrowing costs have weakened demand and inflation, giving the Fed more reason to start cutting interest rates.

However, policymakers have dampened rate-cut expectations and maintained a cautious tone. Most policymakers are not ready to change their stance on the central bank’s policy outlook until there is more evidence of declining inflation. 

EUR/USD key events today

Neither the US nor the Eurozone will release any major reports today, so the pair might trade in a range.

EUR/USD technical price analysis: Bulls reemerge above 30-SMA support

On the technical side, the EUR/USD price is climbing higher after retesting the 30-SMA support, showing bulls are in the lead. At the same time, the price is trading within a bullish channel, further supporting the bullish bias. 

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The price recently broke above the 1.0800 resistance level, trying to surpass the 1.0900 level. After that, the price entered a period of consolidation as the SMA caught up. From here, bulls are likely ready to revisit and break above 1.0900 to make a higher high.

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