EUR/USD: Slides Against Dollar Amid US Inflation Data, China’s Producer Price Deflation
Highlights
- Euro declines due to US inflation data and China’s deflation.
- US consumer prices drop but remain above Fed’s comfort zone.
- Chinese yuan weakness and deflation affect the US dollar.
Overview
On Thursday, the Euro is lower against the US Dollar as traders analyzed US inflation data to anticipate the Federal Reserve’s future policy decisions. Additionally, traders showed increased interest in the US Dollar following China’s report of producer price deflation.
At 11:40 GMT, the EUR/USD currency pair was trading at 1.09321, reflecting a decrease of 0.0052 or -0.47%. On the previous day, the Invesco CurrencyShares Euro Trust ETF (FXE) closed at $101.38, marking an increase of $0.19 or +0.19%
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US Inflation Moderates but Remains Above Comfort Zone
In April, the annual rise in US consumer prices dropped below 5%, a level not seen in the past two years. However, the month-over-month Consumer Price Index (CPI) for April showed a 0.4% increase, following a 0.1% gain in March.
Despite the moderation in US inflation, it still remains significantly above the Federal Reserve’s comfort zone. This suggests that the central bank may not alter its approach to interest rate hikes in the near future, which has negatively impacted the price of gold.
New Concerns About Global Economic Outlook
Furthermore, on Thursday, the US Dollar strengthened as the Chinese yuan reached a two-month low. This occurred as additional evidence of weakness in China’s post-COVID recovery raised concerns about the global economic outlook. China experienced the slowest growth in consumer prices in over two years in April, while deflation at the factory gate intensified.
Technical Analysis
The EUR/USD trades around 1.0965 pivot, indicating a weak short-term trend amid a strong long-term trend.
A breakdown under the pivot at 1.0965 may lead to downside acceleration towards 1.0834 support.
A breakout above the pivot may signal a near-term rally to 1.1141 resistance.
S1 – 1.0834 | R1 – 1.1141 |
S2 – 1.0657 | R2 – 1.1272 |
S3 – 1.0527 | R3 – 1.1449 |