EURUSD Inches Up On Eurozone Inflation Expectations

Summary:
• The Eurozone CPI reading will be out on Monday, and the lack of countering US data could favour EURUSD upside.

EURUSD inched up in the Asian session on Monday as traders positioned themselves for the Eurozone CPI release. At the time of writing, the trading pair was at 1.0895, with the buyers strengthened by a lack of high-impact US data scheduled for release today. Nonetheless, the dollar has support from high US Treasury yields, which will put a lid on gains by the euro.

The February Eurozone Consumer Price Index (CPI) reading is expected to reduce to 2.6% from January’s 2.8%. The ECB has already indicated that it is in no hurry to raise interest rates before it reins in on inflation, and the margin of deviation from the consensus figure could tell us how far we are from seeing a rate cut.

Yields on benchmark 5-year and 10-year bonds rose above 4.300% last week, as expectations of a June Fed rate cut decline. The US economy still struggles with inflationary pressures, going by last week’s figures, which showed a spike in the February Producer Price Index (PPI).  

Elsewhere, the US dollar could get support from safe haven buying as geopolitical tension continues to rise in the Middle East. Israeli Prime Minister Benjamin Netanyahu stated over the weekend that Israel would proceed with its planned ground offensive in Rafah. The South Gaza city is home to over 1.5 million people and a ground offensive is seen by many analysts as a potential tipping point in the war.  Netanyahu has vowed to go against international pressure, insisting that anything other than a total demolition of Hamas and rescue of the remaining hostages would be a loss for Israel.  

Technical analysis

The pivot position for EURUSD is at 1.0900, and the market will likely be choppy as long as resistance remains at that mark. Resistance at that level will favour control by the sellers, with the first support at 1.0870. A continuation of the bearish control could break the support, and move the next target to 1.0855. However, if the pair breaks above the pivot, the momentum will likely shift toward the buyers, with the first resistance at 1.0915. A break past that point could see movement to test 1.0930.