EUR/USD price faces key technical resistance as eurozone inflation edges up to 2.5%
EUR/USD has seen volatile price action in recent sessions, with a sharp rebound following an earlier decline.
On Monday, February 3, the pair surged 1.1% to 1.0350, closing the weekend gap. However, by Tuesday’s Asian session, it retraced 0.7% to 1.0270 before recovering the same percentage in the European session, bringing it back to 1.0340. The pair’s ability to break past the 1.0331 resistance level has set the stage for further upside potential, but key resistance points remain.
From a technical perspective, EUR/USD is now approaching the 100 EMA at 1.0376, a level that could cap gains in the near term. Beyond this, the 50% Fibonacci retracement level at 1.0404 presents another key resistance area for buyers. Meanwhile, RSI on both the daily and 4-hour charts remains in bearish territory, reinforcing the likelihood of limited upside momentum.
EUR/USD price dynamics (December 2024-February 2025). Source: TradingView.
ECB dovish stance limits euro upside despite inflation exceeding forecasts
Macroeconomic factors are also shaping the euro’s outlook. The latest data showed that inflation in the Eurozone ticked up slightly, with the Harmonized Index of Consumer Prices (HICP) rising to 2.5% year-over-year in January from 2.4% in December, exceeding market expectations. Core inflation, which excludes food and energy, remained at 2.7% for the fifth consecutive month, marginally above the anticipated 2.6%. Despite the uptick, inflation remains at its lowest since early 2022, and with the European Central Bank (ECB) maintaining a dovish stance, the euro is poised to face continued headwinds.
Looking ahead, EUR/USD’s price action will likely be dictated by how it interacts with the resistance levels. A break above 1.0376 could open the door for a test above 1.04, but with RSI pointing to bearish conditions, the euro may struggle to hold onto gains. Traders will be watching for any shifts in ECB policy sentiment or further developments in inflation data that could influence the pair’s direction.
The U.S. dollar surged after Trump announced significant tariffs on imports from Canada, Mexico, and China. As a result, EUR/USD dropped to a three-year low but recovered slightly.
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