EURUSD Breaks Above 200 SMA After the Eurozone CPI Inflation

EURUSD turned higher yesterday in the US session after retesting last week’s low at 1.0760s and climbed 1 cent after higher German CPI inflation. Today we had the Eurozone CPI inflation for October and yesterday’s numbers were an indication for a higher Eurozone inflation reading today, although the USD retreat also helped along the way.

Throughout October, EUR/USD has been on a downward trajectory, shedding 4.5 cents and dropping below the moving averages on the daily chart. However, yesterday’s positive movement saw buyers testing the 200-day SMA (purple), a significant technical level. This attempt was initially rejected, leading to a 50-pip drop.

EUR/USD Chart Daily – Buyers Testing the 200 SMA

The stochastic indicator is approaching overbought territory, suggesting that after this current retracement completes, the bearish trend may likely resume. This aligns with a broader technical outlook indicating potential continuation of the downtrend. However, the USD is retreating this week, while the Euro is benefitting from the Eurozone CPI inflation numbers released earlier, which leaned slightly on the “stronger” side.

Eurozone CPI Inflation Report for October  by Eurostat – 31 October 2024

• Eurozone October CPI (Year-over-Year): Rose to 2.0%, slightly above the 1.9% expected, up from September’s 1.7%. This increase reflects a stronger-than-anticipated rise in general price levels across the Eurozone.
• Core CPI (Excluding Volatile Items): Held steady at 2.7%, marginally exceeding the forecast of 2.6%, indicating persistent underlying inflation pressures despite earlier expectations of a slight slowdown.

Headline annual inflation rose in line with expectations, reflecting recent data from individual Eurozone countries. Core annual inflation, however, held steady at 2.7% from September, signaling a more stable trend in underlying price pressures. This consistency in core inflation may reinforce the European Central Bank’s (ECB) cautious optimism, even as they continue to monitor upcoming data for November and December.

Christine Lagarde was on the wires just now, saying that the ECB remains on track to lower interest rates further, with market sentiment now favoring a smaller 25 basis point rate cut in December. Earlier concerns over a possible 50 basis point cut have eased, though the final decision will likely hinge on inflation trends over the coming months.

Remarks by ECB president, Christine Lagarde, to Le Monde newspaper

EUR/USD Live Chart