Euro rises amid mixed inflation signals in the euro area

EURUSD Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	0.99%	101.6 Pips
Week to-date	1.13%	115.2 Pips
February	-0.54%	-56.1 Pips

Upcoming key events (London Time)

No major events for the day.

What happened lately

In the Euro Area, according to Eurostat’s data, the January flash estimate for the Harmonized Index of Consumer Prices (HICP) for one month decreased to -0.3% from 0.4% recorded in December. The consistent decline reinforces a decelerating trend in month-on-month consumer prices. On the other side, the Euro Area Core Harmonised Index of Consumer Prices (HICP), which excludes volatile items like food and energy, remained unchanged at 2.7% for January when compared to December, indicating stable core inflation over the period. Meanwhile, the 12-month flash estimate for the Euro Area’s HICP rose slightly to 2.5% in January from 2.4% in December. This slight increase in the annual measure suggests moderate inflationary pressures on a yearly basis.

Analyzing how these metrics may affect the EURUSD, the slight rise in the 12-month HICP estimation suggests moderate inflationary pressures in the Euro Area. However, the decline in the 1-month HICP indicates consumer price deflation on a monthly basis, which may limit expectations for immediate monetary policy tightening by the European Central Bank. Without major domestic economic events, the market’s response in the EURUSD pair might reflect broader market sentiments. The observed rise of EURUSD by 0.99% to 1.03412 likely reflects broader currency market movements, potentially as a response to shifts in investor risk appraisal rather than a direct reaction to inflation data. Consequently, the exchange rate could be influenced more by external economic factors and investor sentiment in the absence of significant Euro Area-specific economic events. Nevertheless, sustained inflationary trends might prompt future ECB policy adjustments, which in turn could impact the Euro’s valuation versus the Dollar.

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What can we expect from EURUSD today?

EURUSD on Monday rose 0.99% to 1.03412. Price is below 9-Day EMA while Stochastic is rising.

Updated daily direction for EURUSD looks bullish as the pair ended higher after Monday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 1.03906 with break above could target R2 at 1.04401 or figure level area. While towards the downside, we are looking at daily low of 1.02103 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.03499 may suggest continuation after recent positive movement.

For the week to-date, take note that EURUSD is mixed as compared to the prior week.

Key levels to watch out:

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