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  • Investors are on high alert after Friday’s US inflation, pushing prices higher.
  • Some investors believe a 75-bps hike at the Fed meeting on Wednesday is possible.
  • COVID-19 has come back to haunt China’s economic growth.
  • EUR/USD might experience support at 1.0500 on the charts.

The EUR/USD price closed Friday on a strong bearish candle after high US inflation reawakened worries about a more aggressive Fed policy. The pair continued to push lower on Monday morning as the dollar rose on global growth concerns fueled by a COVID-19 warning from Beijing.

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Labor Department figures on Friday showed a higher-than-expected increase in year-on-year inflation at 8.6% last month, the highest since December 1981. This news alerted markets as it dashed hopes that inflation had peaked.

Investors are now scared of a slowdown in the economy with higher interest rates. The next policy meeting will be held on Wednesday and will give directions on what the Fed plans to do about high inflation.

“The inflation data is a game-changer that forces the Fed to switch to a higher gear, front-loading policy tightening,” Jefferies strategist Aneta Markowska wrote in a research note. She believes a 75-bps point hike this week is possible.

On Sunday, Beijing’s district of Chaoyang announced three rounds of mass testing to control a “ferocious” COVID-19 outbreak that started in a bar last week. This outbreak might lead to lockdowns that will slow growth barely two weeks after the city relaxed restrictions.

EUR/USD key events today

There aren’t any significant news releases today that could cause much movement in EUR/USD. The pair is likely to continue with its Friday move.

EUR/USD price technical analysis: Bears Taking Breather at 1.0500

EUR/USD price

Looking at the 4-hour chart, we see a sharp bearish move that has pushed the price to its envelope and the RSI to the oversold region. The price trades below the 30-SMA at around the 1.0500 critical level, which has acted as support on many occasions.

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At this level, short-term bulls might come in to push the price higher and retrace the recent move. If this were to happen, the price would likely find resistance at 1.0600. However, if bulls can maintain their strength, the price might break below 1.0500 and push towards 1.0450.

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