Euro Benefits From German Defence Spending
Additionally, a ceasefire agreement in Ukraine has further strengthened the Euro’s appeal. Nonetheless, ongoing US tariff policies pose challenges for the Euro, impacting trade relations.
EUR/USD stabilised above 1.0900, showing a bullish long-term outlook as it remains above the 200-day Exponential Moving Average. The key support area lies at 1.0630, with significant resistance at the psychological level of 1.1000.
The Consumer Price Index serves as a primary measure of inflation, reflecting price changes for a representative basket of goods and services. With the Federal Reserve aiming for a 2% inflation rate, current pressures from supply-chain issues complicate this goal.
The immediate reaction to the inflation data saw the US Dollar weakening, as the figures suggested that price pressures were continuing to ease. However, the Dollar quickly rebounded as market participants reassessed the implications of a softer-than-expected CPI print. While the overall inflation rate moved lower, it remains above the Federal Reserve’s target, leaving room for policymakers to maintain a cautious approach. The Core CPI reading, which excludes volatile food and energy prices, remains particularly relevant, given its importance in setting expectations for future interest rate decisions.
Technical Outlook For Eurusd
With the US Dollar Index recovering towards 103.75, the recent downtrend appears to be encountering resistance. The bounce from 103.20 indicates that traders are still finding reasons to support the currency, possibly as a defensive move against lingering inflation risks. If the Dollar remains firm in the near term, it could cap gains for the Euro.
At the same time, there is an evident boost for the Euro stemming from fiscal policy discussions in Germany. The prospect of increased defence spending has injected confidence into the currency, with potential knock-on effects for the broader Eurozone. A more stable geopolitical backdrop, underscored by progress in ceasefire negotiations in Ukraine, has also played a part in the Euro’s resilience. That being said, concerns over US trade policy and its impact on European exports could offset some of the recent optimism.
From a technical perspective, the EUR/USD pair remains in a strong position, holding above the 200-day Exponential Moving Average, which is often viewed as a long-term trend indicator. As long as trading stays above this level, buyers are likely to remain engaged. However, the upside is encountering resistance near 1.1000, a level with historical importance. If this barrier is broken convincingly, it would reinforce bullish sentiment and could pave the way for further appreciation.
On the downside, support near 1.0630 remains an area to watch. A break below this level would mark a shift in trading dynamics and could accelerate selling pressure. For now, price action suggests a range-bound movement, with traders reacting to incoming data and central bank commentary.
Inflation remains a dominant theme in shaping policy decisions. The Federal Reserve maintains a 2% target, but ongoing supply-chain difficulties continue to create complications. The latest inflation reading might provide some reassurance that price pressures are easing, yet it will likely take sustained evidence before rate-cut expectations gain further traction. Until then, the Dollar’s rebound hints at lingering caution, and further volatility should be expected.
