EUR/USD stays firm around 1.0840, with traders eyeing German and US inflation data

• The Euro is registering gains of 0.78% in the week after hitting a low of 1.0744.
• A risk-on impulse, US Dollar weakness, and expectations for higher rates in the Eurozone boosted the EUR.
• EUR/USD Price Analysis: Set to test 1.1000 above 1.0900; otherwise, it could fall to 1.0700.

The Euro (EUR) advanced for three straight sessions against the US Dollar (USD), but late in the North American session, the EUR/USD retreated, forming a doji. Hence, indecision is the game's name, as the greenback staged a recovery on Wednesday. The EUR/USD is trading at 1.0841, down 0.02%, as the Asian session begins.

German and US inflation figures, eyed by EUR/USD traders

The shared currency has been bolstered by a soft US Dollar, which snapped two days of straight losses, as shown by a basket of six currencies vs. the buck. The US Dollar Index rose 0.22%, at 102.654 on Wednesday.

The US economic docket featured Pending Home Sales, which increased by 0.8% MoM in February, exceeding expectations for a 0.3% drop. Annually, it fell by 21.1%, less than the 29.4% drop predicted. On the Eurozone (EU) side, the German Gfk Consumer sentiment in April improved to -29.5 from a revised -30.6 in March. Although it improved, it was beneath the estimates of -29.0.

In the meantime, European Central Bank (ECB) policymakers have stressed the need for higher interest rates after the bank turmoil dissipated. Philip Lane, the ECB Chief Economist, said, “Under our baseline scenario, to make sure inflation comes down to 2%, more hikes will be needed.” 

Therefore, the EUR/USD pair has been upward pressured as market participants estimate that the US Federal Reserve (Fed) would leave rates unchanged at 4.75%-5.00%. After that, a few rate cuts have been priced in by the year’s end.

The EUR/USD would be influenced by inflation data in the US and the EU on Thursday and Friday. The Fed’s preferred gauge for inflation, the core PCE, will be revealed on Friday. Any upward revisions could put into play further rate increases by the US central bank. On the EU’s front, rising inflation in Germany would cement the case for another interest rate increase by the ECB.

What to watch?

On Thursday, the EU’s calendar will feature German inflation figures. In the US, the Gross Domestic Product (GDP) for Q4, alongside Initial Jobless Claims for the last week, will be released.

EUR/USD Technical analysis

Given the backdrop, the EUR/USD triple bottom remains in play. A fall below the March 15 daily high at 1.0759 would invalidate the chart pattern and exacerbate a fall. That would expose the 20-day Exponential Moving Average (EMA) at 1.0744, followed by the 50-day EMA, shy of 1.0700, at 1.0696. On the flip side, a break above 1.0900 and the EUR/USD pair will test the week’s high at 1.0929 before challenging 1.1000.