EUR/USD Analysis and Trading Signal

The euro has experienced slight losses on Friday, with EUR/USD down by 0.28%, currently trading at 1.0837 in the North American session.

Eurozone CPI Insights

• Headline CPI: The April inflation report indicates that the headline CPI remains steady at 2.4% year-over-year, holding at its lowest level in almost three years. Monthly headline CPI eased to 0.6%, down from 0.8% in March, aligning with market expectations. Declines in services inflation and energy prices were observed, while prices for food, alcohol, and tobacco saw a slight increase.
• Core CPI: More significantly, core CPI, which excludes volatile items such as energy and food, fell to 2.7% year-over-year, down from 2.9% in March, matching market estimates. This marks the ninth consecutive month of deceleration and the lowest level since February 2022. The European Commission anticipates eurozone inflation to drop to 2.5% in 2024, reaching the 2% target in the latter half of 2025.

ECB Policy Outlook

The European Central Bank (ECB) has effectively reduced inflation from a high of 7% a year ago. The ECB has signaled readiness to lower rates at the June meeting, with ECB President Christine Lagarde hinting at a potential rate cut. However, Lagarde has refrained from indicating a series of rate cuts to avoid market disappointment if the ECB does not follow through.

US Economic Overview

There are no significant economic releases from the US today. Market attention will be on speeches from three voting members of the Federal Open Market Committee (FOMC): Christopher Waller, Mary Daly, and Adriana Kugler. These speeches may offer insights into future US rate policy. FOMC members have recently maintained a hawkish stance, suggesting that restrictive policy is effective and there is no urgency to lower rates.

EUR/USD Technical Analysis

• Support Levels: EUR/USD is currently testing support at 1.0850 and exerting pressure on the next support level at 1.0832.
• Resistance Levels: Immediate resistance is found at 1.0872, followed by 1.0890.

Trading Signal

Current Price: 1.0837

Signal:

• Buy if EUR/USD holds above 1.0850 and breaks above the immediate resistance at 1.0872, targeting 1.0890 and potentially higher.
• Sell if EUR/USD breaks below the support at 1.0832, targeting the next significant support at 1.0800.