- The dollar gained momentum ahead of Tuesday’s main inflation report.
- Forecasts for the US Inflation Report show that annual inflation is likely to reach 3.8%.
- The ECB’s Fabio Panetta noted on Saturday that the time to cut interest rates is fast approaching.
The market painted a bleak picture for the EUR/USD outlook from Monday, while the dollar gained momentum against the euro in anticipation of Tuesday’s key US inflation report. Moreover, with no major reports on Monday, investors awaited data on economic growth in the Eurozone on Wednesday.
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The release of the US inflation report will be the big event this week that will shape the outlook for Fed rate cuts. On many occasions, Fed policymakers have said they need more evidence that inflation is falling and will remain close to the 2% target. Forecasts for tomorrow’s report show that annual inflation is likely to reach 3.8%.
In particular, the Fed’s Lori Logan said on Friday that economic reports must show that inflation is in sustained decline. Otherwise, he is in no hurry to reduce interest rates. This was another reason for investors to dismiss the possibility of a rate cut in March.
Meanwhile, in the eurozone, the ECB’s Fabio Panetta noted on Saturday that the time to cut interest rates is fast approaching. However, he did not comment on the exact timing. ECB policymakers are slowly accepting that the next policy move will be a rate cut. However, markets remain uncertain when this might begin. There is currently a possibility that the ECB will implement its first rate cut in April. Still, there is a chance they will delay, following the trend among major central banks.
EUR/USD key events today
There will be no high-impact data from the US or the Eurozone. As a result, the pair is likely to drift as investors speculate on the upcoming US inflation report.
Technical outlook for EUR/USD: Bears resurface at 1.0800 resistance
On the technical side, the EUR/USD price is jumping lower after retesting the key resistance level of 1.0800. Although the price occasionally breaks through the 30-SMA, showing a shallow trend, it continues to make new lows, supporting a strong downtrend.
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Recently, the price made a new low by breaking below the 1.0800 support level. After that, it made a corrective move to retest 1.0800 as resistance. Moreover, the price action at this level shows that the bears have been waiting to continue the downtrend. If the price breaks below the 30-SMA, it could make a new low at the 1.0701 support level.
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