The euro weakened on Tuesday, with EUR/USD falling below the 1.1400 mark, after new data revealed a sharper-than-expected slowdown in Eurozone inflation. According to Eurostat, the Harmonized Index of Consumer Prices (HICP) dropped to 1.9% in May, down from 2.2% in April, reviving concerns over the pace of disinflation across the currency bloc.
The core HICP, which excludes energy and food, rose by 2.3% year-over-year, slightly below the 2.5% market consensus. The figures suggest that underlying price pressures are easing, potentially complicating the European Central Bank’s (ECB) tightening timeline.
The softer inflation print pushed the euro lower during the European session, as investors recalibrated expectations for rate cuts later this year.
USD Gains Ahead of Jobs Data
The dollar index staged a mild rebound, trimming earlier losses amid a broader recovery in risk sentiment. Markets are closely eyeing April’s Job Openings and Labor Turnover Survey (JOLTS), due later today from the U.S. Bureau of Labor Statistics.
Economists expect a print near 7.5 million job openings. The outcome will likely shape short-term currency moves:
- Above 7.7M: Bullish for USD; reinforces labor market resilience
- Below 7M: Bearish for USD; signals cooling job demand
Earlier in the week, the ISM Manufacturing PMI came in at 48.5 for May, extending its contraction streak and reinforcing bets that the Federal Reserve may begin cutting rates by September.
A planned meeting between President Biden and China’s President Xi Jinping later this week may also influence sentiment, with renewed trade diplomacy potentially easing safe-haven flows into the dollar.
Technical Outlook: Key Levels to Watch
Despite the current pullback, technical indicators suggest EUR/USD retains some bullish structure, though momentum has weakened.
Support levels:
- 1.1380: Fibonacci 23.6% retracement
- 1.1320: 200-period Simple Moving Average
- 1.1270: Confluence of 38.2% Fibonacci and trendline support
Resistance zones:
- 1.1450: Static resistance level
- 1.1500: Psychological round figure
- 1.1575: April 21 high
The Relative Strength Index (RSI) remains above 50 on the 4-hour chart, indicating that upward bias is intact but fading.
As long as the euro struggles to reclaim 1.1450 decisively, traders may favor a near-term consolidation below 1.1400.