EUR/USD Outlook: Euro Steadies Despite Easing German Inflation

• A sudden slowdown in German inflation caused the Euro to decline.
• German headline CPI decreased from 10% in November to 8.6% annually in December.
• The ECB expects the Eurozone’s inflation to surpass its 2% objective by 2025.

Today’s EUR/USD outlook is bearish. On Wednesday, the Euro nursed losses from the previous session. This occurred after a sudden slowdown in German inflation drove up bund prices and caused the Euro to decline.

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The Euro saw an overnight decline of 1%, its biggest decline in more than two months, and it was trading close to three-week lows at $1.0550 early in the Asian session.

The move increased the dollar’s value while also causing anxiety as US markets plummeted.

Due to declining energy costs and the government’s one-time payment of family energy bills, German inflation dropped for a second consecutive month in December. It came below predictions even though economists caution that a continued reduction is not guaranteed.

German headline CPI decreased from 10% in November to 8.6% annually in December, below the predicted 9.1%. European bonds, including German bunds, had a strong rally.

The ECB has increased interest rates by 2.5 percentage points since July because it expects the euro zone’s inflation to surpass its 2% objective until 2025.

According to data released on Tuesday, the United States’ construction spending unexpectedly increased in November thanks to increases in nonresidential projects. However, rising mortgage rates negatively impacted single-family homebuilding.

Data earlier indicated that China’s factory activity declined quicker in December as rising COVID-19 infections interrupted output and weighed on demand, giving the dollar a boost from safety buying.

EUR/USD key events today

There will be PMI data from the Eurozone and the US later today. Investors will also pay attention to the JOLT’s job openings report and the FOMC meeting minutes from the US.

EUR/USD technical outlook: Sellers looking at 1.0500

EUR/USD on the 4-hour chart is in a strong bearish move as the price is trading far below the 30-SMA. Another sign that bears are stronger is that the RSI is trading below 50.

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After breaking below the 1.0670 key level, sellers made a very large-bodied candle that broke below the 1.0580 support level. The price is now retesting the recently broken support. If this level holds as resistance, the price will fall to the next support at 1.0500.

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