EUR/USD price action warns of downside risk ahead of key inflation and growth data

• EUR/USD looks tired on the charts despite remaining in a slight uptrend
• Key Eurozone inflation and GDP data will be released on Tuesday
• USD event risk ramps up from Wednesday
• Selling rallies in EUR/USD preferred near-term

EUR/USD staggering and soggy

EUR/USD looks tired ahead of key inflation and GDP data from the continent later Tuesday, struggling to hold the gains which took it to two-week highs on Friday.

The EUR/USD four hourly chart reminds me of a boxer who’s just crawled off the mat after being hit flush on the jaw, staggering around without really going anywhere. With the price struggling to find traction above 1.0731 and momentum indicators swinging lower, you get the sense it could easily find the canvas again without a meaningful positive surprise to counteract US dollar strength.

Eurozone data preview

Markets expect underlying Eurozone inflation to grow 2.6% from a year earlier, above the ECB’s 2% target but down from 2.9% in March. Following Germany’s inflation data released on Monday, the risks for the regional flash estimate are arguably skewed to the upside, especially when other indicators suggest periphery nations may be performing better than the Germany economy right now.

On growth, flash Q1 GDP is expected to show activity grew 0.1%, leaving the increase in a year earlier at 0.2%. While still anemic, such an outcome would be an improvement on the flat quarterly outcome in the final three months of 2024.

USD event risk ramps from Wednesday

While there is plenty of US data out later in the session, everything will be overshadowed by payrolls, PMIs, Treasury refunding details and the Fed decision later in the week, meaning the near-term price performance may be dictated by the European side of the relative economic performance equation, along with last minute month-end flows.

On the downside, 1.0680 and support from 1.0632 are levels to watch. On the topside, probes above 1.0731 towards 1.0753 have not lasted long over the past week.

-- Written by David Scutt

Follow David on Twitter @scutty

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