US Dollar Regains Short Term Control as Tariff Tensions Ease
EUR/USD at Support Ahead of Inflation Data. Bounce or Break?
The trade tariffs keep on making the headlines but the narrative seems to have shifted as now President Trump is more lenient towards reaching common ground. A U.S.–UK trade deal made last week established a 10% baseline and lowered duties on automobile imports. This development increased optimism regarding U.S.–China negotiations that took place over the weekend but will likely extend to the coming weeks.
The Fed kept the rate unchanged, as it was widely anticipated and Fed Chair Powell highlighted risks coming from the tariffs situation, as well as uncertainty regarding how inflation will be affected. He also mentioned slow economic growth but as we can see, President Trump is already extending “olive branches” to some nations, so the worst may be behind us.
Economic Calendar Highlights
The first and probably most important event of the week will be the release of the U.S. Consumer Price Index (CPI), which is the main inflation gauge. The release is scheduled for Tuesday at 12:30 pm GMT; the Core CPI is expected to increase by 0.3% from last month’s 0.1%, and the headline CPI is expected to show 0.3%, higher than last month’s -0.1%. The yearly CPI is expected to remain unchanged at 2.4%.
The U.S. Producer Price Index (PPI) will be released Thursday at 12:30 pm GMT, alongside the Core PPI. The indicators have inflationary implications because a higher producer price will be eventually passed on to the consumer. The U.S. Retail Sales and Core version of the indicator will be released at the same time. Sales made at retail levels are the main part of consumer spending, which in turn represents the majority of the overall economic activity.
The last releases of the week will be the Prelim UoM Consumer Sentiment and Inflation Expectations surveys scheduled for release on Friday at 12:30 pm GMT. Consumer sentiment can have an impact on consumer spending, hence the importance of the survey.
Technical Outlook – EUR/USD
The pair is now dancing around 1.1200 support and it looks like the dollar bulls have regained short-term control. From a wider perspective, the pair is still in an uptrend, so we may see a bounce at the current level.
If the price returns above the bullish trend line seen on the chart, we can expect to see another encounter with 1.1500 resistance. As long as it remains below the trend line, the bias is bearish, favouring a clean break of 1.1200 (the current candle is not closed so the break is not yet established. If the break happens, the next bullish move may happen when the RSI becomes oversold. Of course, any further information about the tariff negotiations will have an impact on the charts.
