EUR/USD Steady as Focus Shifts from Tariffs to U.S. Inflation Data
EUR/USD traded higher on Tuesday, reaching 1.03518 in New York after rebounding from a session low of 1.02925 in Asia. The pair benefited from fading U.S. dollar momentum, despite higher Treasury yields, as Fed Chair Jerome Powell’s congressional testimony failed to provide fresh support for the greenback. Instead, investors turned their attention toward key U.S. inflation data due this week, with CPI on Wednesday expected to have a significant impact on Fed rate expectations. A rally in EUR/JPY to 157.80 and tighter German-U.S. spreads also helped buoy EUR/USD, contributing to its +0.41% gain in the afternoon session.
Technically, EUR/USD remains trapped within its broader 1.0150-1.0550 range, in place since December. The pair is hovering near the magnetic 1.0350 level, reinforcing investor indecision as highlighted by January and February’s monthly doji candles. Immediate resistance is at 1.0380, with further hurdles at 1.0450 and 1.0550. On the downside, support lies at 1.0290, followed by stronger protection near 1.0200. The technical picture suggests that a decisive break above 1.0380 or below 1.0290 could set the next directional move.
Traders are now focused on U.S. CPI and its implications for Fed policy. A stronger-than-expected print could reinforce concerns over sticky inflation, pushing Treasury yields higher and widening Fed-ECB rate differentials, potentially sending EUR/USD lower towards parity. Conversely, a weaker CPI reading could fuel speculation about the Fed ending its easing cycle, reducing the dollar’s yield advantage and allowing EUR/USD to retest resistance levels. With remarks from Powell and Bostic also on the docket Wednesday, EUR/USD is poised for volatility, with a break of key technical levels likely to determine its near-term trajectory.