EUR/USD hangs on the balance ahead of FOMC minutes

The EUR/USD price is at an important level of support as investors react to the latest Eurozone consumer price index (CPI) data. The pair is trading at 1.1710, which is along the lowest level since March this year.

Eurozone inflation data

The Eurozone consumer inflation held steady in July as the bloc emerged from the Covid-19 pandemic. Data published by Eurostat show that the headline consumer price index rose from 1.9% in June to 2.2% in July on a year-on-year basis. This increase was in line with what most analysts were expecting. Still, the CPI declined to -0.1% on a month-on-month basis.

Meanwhile, the core inflation number that excludes the volatile food and energy prices declined by 0.4% in July. It rose by 0.7% on an annualised basis. The core CPI was substantially lower because the main inflation was mostly because of energy prices. Food and alcohol prices rose by 0.35% in July.

These numbers came a few days after the US published the relatively mixed inflation numbers. The data showed that the country’s headline inflation rate rose by 5.4% in July, which was the highest level since 2008. 

The EUR/USD pair also reacted to the relatively strong US housing data. According to the commerce industry, the US housing starts declined from more than 1.643 million in June to 1.53 million in July. In the same period, the number of building permits rose from 1.54 million to 1.635 million. These numbers show that the country’s housing market remains steady.

The next key catalyst for the EUR/USD will be the upcoming Federal Reserve minutes that will come during the American session. These minutes comes at a time when some Fed officials are calling for tapering of asset purchases. In an interview with the Financial Times, Fed’s Eric Rosengren said:

“Our big issue right now is not that people aren’t willing to purchase goods and services. The problem is that it’s difficult to be able to find the labour and find the materials to actually produce the goods and services,”

EUR/USD forecast

The daily chart shows that the EUR/USD pair has been in a strong bearish trend. Along the way, it has formed an M pattern that is shown in green. It has also moved below the 25-day and 50-day moving averages, which is a positive thing.

Meanwhile, the pair is at an important level considering that this price is along the lowest level on March this year. Therefore, the pair will likely break out lower as investors target the next key support at 1.1500.