- Ifo sentiment data disappoint in February.
- CPI declines by 1% in the euro area in January.
- US Dollar Index steadies near mid-96s.
After dropping toward the 1.13 mark following the disappointing macroeconomic data releases from Germany, the EUR/USD pair recovered its losses in the second half of the day and was last seen trading at 1.1345, adding 0.1% on a daily basis. With today’s modest rebound, the pair now looks to close the week in the positive territory for the first time in three weeks.
Earlier today, Germany’s Ifo Institue reported that the Business Climate, Current Assessment, and Expectation indexes all dropped in February and came in below analysts’ estimates. Commenting on the data, “Today’s Ifo index somewhat undermines the tentative signs of stabilisation we saw earlier this week in the ZEW index and PMIs. The still-high uncertainties, mainly stemming from trade, China and Brexit are denting German business sentiment,” Carsten Brzeski, chief economist at ING, said.
Other data on Friday showed that the annual CPI in the eurozone ticked down to 1.4% in January amid a 1% decline on a monthly basis. The core CPI, which excludes food and energy prices, came in at -1.5% and 1.1% on a monthly and yearly basis, respectively, to match market expectations.
In the second half of the day, a sharp drop witnessed in the 10-year US T-bond yield weighed on the greenback and allowed the pair to gain traction. At the moment, the 10-year T-bond yield is down 1.3% on the day and the US Dollar Index is in the negative territory near 96.50. Meanwhile, in its semiannual report, the Fed didn’t offer anything new and failed to trigger a market reaction.
- Fed: Softer conditions and muted inflation warranted patient approach to further rate increases.
Technical outlook by FXStreet Chief Analyst Valeria Bednarik
In the daily chart, the pair is poised to post a third consecutive doji in-a-row, a sign that there’s no winner yet in this battle. It is also developing below all of its moving averages, which maintain downward slopes while technical indicators lack directional strength, but hold within negative levels, skewing the risk to the downside.
The pair has held above the 1.1300 level ever since breaking above it, so below it, bulls will likely get discouraged. The next relevant support is 1.1215, the low set in November 2018, followed by the 1.1160 price zone. The mentioned Fibonacci resistance that capped advances this week stands at 1.1375, with gains beyond it favoring an extension toward 1.1460 the most.
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