EURUSD Slide Continues As the Dollar Targets Sub-1.9000

Summary:
• The absence of high-impact data from the Eurozone favours gains by the dollar, which is building on CPI-driven gains. How low can EURUSD go?

The dollar extended its gains against the euro for the third straight session on Tuesday, as the greenback got propulsion from US CPI data. EURUSD traded at 1.0911 at 15.45 UTC, with Germany’s CPI providing some support for the Eurozone currency.

The EURUSD pair could get new impetus when the results of 10-year US Treasury Note auction comes in later on Wednesday. Furthermore, the absence of high-impact macroeconomic data release from the US and the Eurozone afterwards means that the downtrend on the currency pair is likely to continue for the rest of Tuesday’s trading session.

The Eurozone’s largest economy, Germany, had its headline inflation meet forecast figures in February. The CPI figure rose from 0.2% to 0.4% month-on-month, while the year-on-year figure fell from 2.9% in January to 2.5%. While these figures are marginally outside ECB’s target of 2.0%, they point to stabilisation of Germany’s economy, which is emerging from a long period of underperformance. Nonetheless, the CPI figures had dovish undertones, as they align with recent comments by Bundesbank president and Joachim Nagel and Banque de France President François Villeroy de Galhau that the Eurozone should prepare for lower interest rates by Spring.

US Core CPI (excluding food and energy) remained unchanged at 0.4% in February, beating the forecast month-on-month figure by 0.1%. The year-on-year headline inflation figure beat estimates by a similar margin to stand at 3.2%. This supports Fed Chairman Jerome Powell’s latest statement on the need to get more concrete economic data before cutting interest rates.

Technical analysis

EURUSD faces resistance at 1.0935, and has found support at 1.0890. This bear-leaning market will likely favour a continuation of the downside as long as the sellers keep action below the 1.0935 mark. Furthermore, extended control by the sellers will break the 1.0890 support, pushing the next target lower to 1.0865. However, the buyers could get the upper hand if they manage to keep action above 1.0935. That could build the momentum to break the 1.0960 resistance, thus invalidating the downside narration and potentially testing 1.0980.