EUR/USD price sentiment shifts amid U.S. PPI miss and multiple technical resistance
EUR/USD rebounds from multi-year low, reaches 50% Fibonacci retracement
EUR/USD price action this week began with a sharp decline to a multi-year low, dropping below the critical 1.02 level on January 13.
However, the pair quickly rebounded, surging to 1.031 the following day and reaching the significant 50% Fibonacci retracement level. This recovery was fueled by a notable shift in market sentiment, as investor confidence in the euro grew following reports of U.S. President-elect Donald Trump’s economic team considering a gradual increase in import tariffs on the eurozone.
The rebound in EUR/USD coincided with an improvement in key technical indicators. The Relative Strength Index (RSI) moved out of oversold territory into the bullish zone above 50, further supporting the bullish price action. However, market optimism was tempered by weaker-than-expected U.S. economic data, including the December Producer Price Index (PPI) report. The PPI showed a modest 0.2% month-over-month increase and a 3.3% annual rise—slightly below the anticipated 3.4%—although it marked the largest annual increase since February 2023.
EUR/USD price dynamics (November 2024-January 2025). Source: TradingView
EUR/USD price outlook: Technical resistance at Fib 50% as market awaits CPI report
Despite improving sentiment around the euro, the EUR/USD pair is now trading near 1.029 after a pullback in the prior Asian session, as the market digests recent data and technical signals. The 100-period Exponential Moving Average (EMA) on the 4-hour chart represents a key resistance level. This technical barrier is further reinforced by the resistance structure within the bearish channel, posing a challenge for the pair to break higher in the near term.
Looking ahead, the direction of EUR/USD will largely depend on two key factors: the impact of U.S. inflation data, particularly the upcoming Consumer Price Index (CPI) report, and the ability to overcome the outlined technical resistance levels. Market participants will be closely monitoring these developments, which could provide clearer guidance on the outlook for both the U.S. Dollar and the Euro in the coming weeks.
The EUR/USD pair also extended its losses to reach a fresh three-year low, as the U.S. dollar remained strong, buoyed by a robust December employment report.
