• The Euro nudges higher with the US Dollar weighed in heightened hopes of Fed cuts in March.
• A softer-than-expected US PPI on Friday sent the US Dollar lower across the board.
• Trading is light on Monday, with US markets closed on bank holiday.

The Euro (EUR) has opened the week on a moderately positive tone, with a mild appetite for risk prevailing in the European session. Trading volumes are expected to remain subdued, as US markets are closed for Martin Luther King's birthday, and the Eurozone industrial production is the only data worth mentioning today.

The US Dollar remains on the defensive, with the Dollar Index (DXY) unable to put a significant distance from late December lows. The inflation data released last week has failed to ease investors’ hopes that the Federal Reserve  (Fed) will slash interest rates aggressively this year, starting with a 25 bps rate cut in March.

Traders welcomed December’s unexpected decline of the US Producer Prices Index (PPI), increasing their bets for Fed easing and ignoring the uptick in the CPI figures and Fed officials’ warnings about excessive optimism. US Treasury Yields retreated, with the benchmark 10-year yield dipping below the 4% level, and the US Dollar eased, to close the week practically flat.

This week, the focus will be on the Eurozone Consumer Price Index (CPI) and US Retail Sales data. These figures will give further insight into the Eurozone and US economic outlook and might help the EUR/USD to break the horizontal range that is constraining price action.

Daily digest market movers: Euro maintains a mildly positive tone in risk-on environment

• The Euro is ticking up on a calm session on Monday with hopes of Fed cuts weighing on the US Dollar.
   
• Eurozone Industrial Production contracted at a 0.3% pace, as expected in December. Year-on-year, production declined 6.8%, well beyond the 5.9% expected. 
   
• US PPI declined 0.1% in December on month, against expectations of a 0.1% increase, which has revived hopes of Fed cuts in March.
   
• The CME Group FedWatch Tool shows a more than 70% chance that the Fed will lower interest rates in March and a 75% possibility of  another rate cut in May.
   
• Investors have ignored the uptick in the CPI and Fed officials’ comments affirming that it is still too early for rate cuts.
   
• European Central Bank (ECB) President Christine Lagarde showed an unprecedented bearish tone on Friday signaling the end of interest rate hikes, which is weighing on Euro bulls.
   
• ECB Board member and Governor of the Bank of Ireland, Philip Lane, has discarded any rate cut until June in an interview over the weekend. This has given some support to the Euro.
   
• In the Eurozone calendar on Wednesday, Eurostat is expected to confirm that the CPI accelerated to 2.9% year-on-year in December from 2.5% in November, while the Core inflation eased to a 3.4% yearly pace from the previous 3.6% rate.
   
• Also on Wednesday, US Retail Sales are expected to have increased in December, which might limit the US Dollar weakness.

Technical Analysis: EUR/USD maintains the broader positive trend

The EUR/USD keeps trading within a narrow range on Monday, with price action trapped between the 4-hour 100 and 200 SMAs, with the RSI flattening around the 50 level, which suggests a lack of clear direction.

The broader trend, however, remains positive, with price action reflecting higher highs and higher lows. Immediate support remains at 1.0930, where the 4-hour 200 SMA meets the price. Below here, the trendline support from early November lows, now around 1.0900, and the January 5 low at 1.0875 are likely to challenge bears.

On the upside, the pair needs to breach a strong resistance at 1.1000, where the pair has printed a double top. This level is closing the path toward a minor resistance at 1.1075, ahead of December’s peak at 1.1145