EURUSD Keeps Attacking 1.12 Despite Slowing Inflation in Europe

EURUSD has been showing resilience despite being unable to hold gains above 1.12 and a weakening European economy. The retraces lower continue to get smaller and the lows keep getting higher, which is a sign that the resistance zone above 1.12 will likely be broken, as the USD remains weak, while the Chinese monetary and fiscal stimulus are boosting risk sentiment, fueling the bullish momentum in this forex pair.

After announcing monetary stimulus measures that sent risk currencies lower and pushed the U.S. dollar higher, China delayed its fiscal stimulus rollout. This delay caused EUR/USD to drop by one cent on Thursday. However, the currency rebounded yesterday as expectations for China’s fiscal stimulus strengthened.

EUR/USD Chart H4 – A Triangle Is Forming

The U.S. economy has shown stability this week, with positive durable goods orders pushing the USD 50 points higher and sending EUR/USD down to 1.1125. Despite this, buyers returned, and the pair reversed upward, bouncing back above 1.12, indicating strong buying pressure with progressively higher lows. The European Central Bank (ECB) is currently in a rate-cutting cycle, and Europe’s economic outlook isn’t much brighter than the U.S.

Nevertheless, it has been challenging to create an optimistic outlook for EUR/USD in Q3. Despite a slowing rate of inflation in Europe, as shown by data from Spain and France, buyers have consistently driven the pair higher throughout the quarter, with a series of higher highs and lows. A break above the 1.12 level could open the path to 1.1275, last year’s high, indicating continued bullish momentum.

Spanish Flash CPI YoY for September

• CPI (Consumer Price Index):
  • Came in at +1.5% y/y, below the expected +1.9%.
  • This marks a decline from the previous month’s +2.3%.
• HICP (Harmonized Index of Consumer Prices):
  • Reported at +1.7% y/y, slightly under the forecast of +1.9%.
  • Down from the prior reading of +2.4%.

The lower-than-expected inflation figures for September suggest that price pressures in Spain are easing more rapidly than anticipated.

France September Preliminary CPI

EUR/USD Live Chart