Euro Slips Ahead of German Inflation, GDP Data

Key Moments

EUR/USD Pulls Back Ahead of Key Eurozone Data

The Euro (EUR) is trading modestly weaker against the US Dollar (USD), hovering close to 1.1455 in early European dealings on Thursday. The move reflects a mild consolidation following a robust advance over the prior two sessions, as market participants turn their attention to upcoming German flash Harmonized Index of Consumer Prices (HICP) figures for July.

Estimates point to German headline HICP increasing by 2.8% Year-on-Year (YoY), compared with the previous 2.4% reading. On a month-on-month basis, the headline HICP is projected to rise by 0.8% after a 0.2% decline in June.

Stronger-than-expected inflation data would likely reinforce expectations that the European Central Bank (ECB) could consider further interest rate hikes. Alongside the inflation release, traders will also be closely watching the preliminary readings of German and Eurozone Q2 Gross Domestic Product (GDP).

Fed Holds Rates, Flags Inflation Risks

On Wednesday, EUR/USD advanced sharply following the latest policy decision from the Federal Reserve. The Fed opted to keep the federal funds rate unchanged in a 3.50%-3.75% range for the fifth consecutive meeting. Policymakers reiterated that inflation risks remain tilted to the upside and emphasized their commitment to bringing price pressures down.

EUR/USD Technical Setup

At the time of writing, EUR/USD is trading marginally lower around 1.1455. Despite the slight pullback, the short-term technical tone has improved. The pair is holding above the 20-period exponential moving average (EMA), currently located at 1.1422, indicating better near-term support.

The daily chart shows a Double Bottom pattern, signaling renewed buying interest after an extended period of weakness. A sustained move above a key resistance level at 1.1483 would further reinforce the constructive outlook for the pair.

The Relative Strength Index (14) has transitioned from the 20.00-40.00 band into the 40.00-60.00 range, suggesting that bearish momentum has eased.

On the downside, immediate support is seen at the 20-period EMA at 1.1422, followed by the July 28 low at 1.1353. On the upside, if EUR/USD manages to break decisively above 1.1483, the pair could potentially extend gains toward the June 12 low at 1.1557.

German HICP Snapshot

The Harmonized Index of Consumer Prices (HICP) is released monthly by the German statistics office Destatis and is designed using a methodology harmonized across European Union member states to enable cross-country comparisons. The YoY HICP figure compares price levels in the reference month with those recorded one year earlier. In general, higher HICP readings are considered supportive for the Euro, while softer readings tend to be negative for the currency.