Euro Steady vs Dollar Ahead of CPI and ECB Decisions

Key Moments

EUR/USD Steady Ahead of Key US and Eurozone Events

EUR/USD is trading in a narrow band around 1.1545 during the Asian session on Wednesday, with the pair showing limited volatility as market participants look ahead to the United States (US) Consumer Price Index (CPI) release for May, scheduled for 12:30 GMT, and the upcoming European Central Bank (ECB) policy decision.

At the time of writing, the US Dollar Index (DXY) – which measures the US Dollar (USD) against six major peers – is moving sideways around 99.96, reflecting a cautious stance in the broader currency market.

Traders are watching the US inflation numbers closely for clues on the Federal Reserve’s (Fed) future monetary policy path. The May CPI data are projected to show an increase in headline inflation to 4.2% Year-on-Year (YoY), up from 3.8% in April. Core CPI, which excludes food and energy components, is expected to have risen at an annual rate of 2.9%, compared with 2.8% previously.

ECB Policy Expectations and Eurozone Backdrop

In the Eurozone, attention is turning to the ECB’s monetary policy announcement on Thursday. Market expectations point to a 25 basis point (bps) increase in the central bank’s key borrowing rates, alongside a hawkish policy tone as officials respond to mounting inflationary pressures linked to higher energy costs.

Consensus also looks for the ECB to lift its Deposit Facility Rate from 2% to 2.25% at its next scheduled decision.

One of the European Central Bank’s three key policy rates, the rate on the deposit facility, is the interest rate banks receive when placing funds with the ECB. It is set at each of the central bank’s eight scheduled meetings per year.

Technical Picture: Bearish Bias Persists Below Key Moving Average

From a technical standpoint, EUR/USD is trading almost unchanged around 1.1545, maintaining a cautious tone. The near-term bias remains negative as the pair continues to trade below the 20-period Exponential Moving Average (EMA), located at 1.1611.

The price structure is characterized by a Symmetrical Triangle pattern, indicating that the broader trend is still sideways despite the current bearish tilt.

The Relative Strength Index (RSI) stands at 37.9, below the neutral 50 mark, signaling that downside pressure remains in place even as the pair trades not far from recent lows.

Key Support and Resistance Levels for EUR/USD

On the downside, the first notable support is seen near 1.1502, around the area where a rising trend line has recently been broken and where buyers have previously emerged. A failure to hold this region could open the door for a decline toward the March 13 low at 1.1411.

On the upside, initial resistance is aligned with the 20-day EMA at 1.1611. Above that, a more substantial barrier is located near 1.1698 at a descending trend line. Only a sustained break above both of these resistance levels would start to alleviate the prevailing bearish bias in the pair.

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