EUR/USD Forecast: Bulls keep fighting, despite worrisome inflation data

EUR/USD Current Price: 1.0523

• The EU Consumer Price Index was confirmed at 7.4% YoY in April.
• Wall Street is under pressure ahead of the opening as enthusiasm begins to fade.
• EUR/USD retains its positive bias in the near term but needs to break above 1.0575.

The EUR/USD pair is in retreat mode, easing from a fresh weekly high of 1.0563 reached during Asian trading hours. The enthusiasm among traders witnessed in the first two days of the week seems to have found a ceiling. European stocks are down, dragging US futures into negative levels, as government bond yields pressure weekly highs.

Inflation-related concerns are back on the table after the UK and the EU released their latest data. The UK Consumer Price Index was up by 9% YoY in April, slightly better than the 9.1% expected. In the Union, the CPI was confirmed at 7.4%, slightly below the preliminary estimate of 7.5%, although the core reading was upwardly revised from 3% to 3.5%. Finally, the Canadian benchmark hit 6.8% YoY, higher than anticipated.

As for the US, the country published April Building Permits, down 3.2% MoM,  and Housing Starts for the same month,  which declined by 0.2%, both missing the market’s expectations. There is no more data coming up for the rest of the session, with the focus then on sentiment drivers.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair suggests that the corrective recovery could be complete. The pair is retreating from a firmly bearish 20 SMA, while technical indicators have lost their bullish strength. The Momentum is currently hovering around its midline, while the RSI has already resumed its decline and now hovers around 42.

In the near term, and according to the 4-hour chart, the risk remains skewed to the upside. The pair trades around 1.0520, just below a bearish 100 SMA but still holding above a bullish 20 SMA. Technical indicators, in the meantime, have resumed their advances within positive levels after correcting overbought conditions. Further gains are likely on a break above 1.0575, the immediate resistance level.

Support levels: 1.0510 1.0470 1.0430

Resistance levels: 1.0575 1.0620 1.0660

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