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  • The EUR/USD pair remains in the red near a weekly low.
  • US Treasury yields reached a 2.5-year high after the US CPI climbed to a nearly 50-year high.
  • Lagarde ruled out faster rate hikes, Barkin remained cautious despite ECB’s hawkish remarks.
  • The calendar will feature the consumer sentiment index in Michigan and inflation in Germany.

As of Friday morning, the EUR/USD price is hovering below 1.1400, holding the previous day’s pullback from a three-month high.

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In addition, comments from several Fed speakers and the US consumer price index (CPI) put pressure on the pair ahead of Christine Lagarde’s remarks. The major pair pared intraday losses to 0.30% at press time after recent comments by Richmond Fed President Thomas Barkin.

The US consumer price index (CPI) for January rose to a near 50-year high and averaged 7.5% for the year compared to predictions of 7.3% and 7.0%.

As if high inflation wasn’t already expected, St. Louis Fed President James Bullard recommended a rate hike of 100 basis points through the end of July, as well as beginning balance sheet trimming in the second quarter. Fed Chair Bullard also discussed the possibility of a 50 basis point rate hike in March.

Afterward, Federal Reserve Bank of Richmond President Thomas Barkin predicted the US economy would return to previous trends this quarter. Barkin, however, was not as hawkish as Bullard, saying he needed to be convinced that a 50 basis point hike was necessary.

Although Fed Chairman Bernanke’s comments were moderate, if not overly optimistic, ECB Chair Lagarde’s remarks provided more evidence that the regional central bank will not be in the bull club anytime soon. ECB’s Lagarde stated that now raising the key interest rate would not reduce record-high inflation in the eurozone but only hurt the economy.

The 10-year Treasury yield remains at its highest level since July 2019, rising one basis point to 2.035%, while the S&P 500 futures fell at least 0.30%.

With the Fed’s dovish stance widening and the ECB refusing to hike rates, the EUR/USD will likely remain weak. On the other hand, the German harmonized index of consumer prices for January will likely come in line with the initial forecast of 5.1%y/y, so the pair will head in the right direction. Following that, pair traders may be amused by the preliminary US Michigan CPI for February, which was anticipated to hit 67.5 versus 67.2 earlier.

EUR/USD price technical analysis: Double bottom formation

EUR/USD price

The EUR/USD price has formed a double bottom at 1.1374 and is now paring losses. However, the technical outlook is very negative. The 20-period SMA on the 4-hour chart suggests more losses, while the 50-period SMA provides interim support. On breaking the double bottom, the pair may head towards 1.1330. Further bearish targets lie around 1.1260.

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Alternatively, the EUR/USD price may find a hurdle around 1.1400 ahead of 1.1440 and then 1.1500. However, the volume data shows a higher probability of downside breakout.

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