EUR/USD failed to break past the 1.0890 mark on Tuesday, despite a bullish run early in the day, settling instead near 1.0860. This level continues to be a key consolidation point for the pair as traders await the release of German CPI inflation data. Additionally, important US economic indicators like GDP and PCE inflation are set to be announced later in the week, which could have a significant impact on market sentiment.
Investors are closely monitoring German CPI inflation, expected to drop to 0.2% MoM in May from the previous 0.5%. The hope is that easing inflation in key European countries will prompt the ECB to cut rates at their upcoming meeting in June. On the other side of the Atlantic, US traders are trying to predict when the Fed will make its first rate cut. Initially, the market expected multiple cuts, but now the focus has shifted to the possibility of a quarter-point cut in September.
The US Annualized Q1 GDP, expected to ease to 1.3% from the previous 1.6%, and the PCE Price Index inflation on Friday are key data points that will influence market direction. Despite the uncertainty surrounding these indicators, EUR/USD is showing signs of a potential bullish move, with the MACD indicating a hidden bullish divergence. However, the 200-day EMA at 1.0804 is acting as a strong support level, threatening to pull the pair down if breached.
The technical outlook for EUR/USD suggests a potential push higher if the pair can bounce off the 200-hour EMA at 1.0844. The daily MACD is also showing signs of indecision, but the overall sentiment remains neutral. Traders will be closely monitoring these key levels and economic data releases to determine the future direction of the pair. As market volatility continues to be driven by global economic uncertainty, the next few days will be crucial for EUR/USD traders.
