Buoyant Dollar Leaves EURUSD Flat Despite Resilient Eurozone Inflation

Piece Written By Mfanafuthi Mhlongo, Trive Financial Market Analyst 

The EURUSD currency pair started the week on a bullish note on Monday as inflation data from the Eurozone showed a further fall. The headline inflation rate slowed in line with expectations to 5.3% in July, while core inflation remained unchanged at 5.5%, against the market’s expectations of a slightly higher than the expectations of a decline to 5.4%. The inflation report, together with the robust GDP data figure, helped to ease some of the pressure on the euro. 

However, the dollar remained resilient, buoyed by Friday’s employment cost index data, keeping the cross flat just above the 1.10 price level, with analysts eyeing potential further downside. This suggests that investors are still concerned about the outlook for the Eurozone economy, despite the recent improvement in inflation. 


The 4Hchart shows that despite initial concerns of a sustained drop below key support levels, EURUSD managed to stage a sharp rebound, hitting the high of 1.10403 during the session. The pair appears to have entered a consolidation phase between 1.09442 and 1.10661 as traders await more cues from upcoming economic indicators. 

Therefore, for the downside, a sustained push below the daily pivot point could offer short-trading opportunities as the price action moves towards the 1.09442 support level. A break below the level, supported by significant volume, would bring the 1.08662 support level into play. However, for the bullish case, opportunities could exist towards the 1.10661 resistance level. A sustained break above the level would bring the 61.80% Fibonacci retracement level at the 1.11496 price level into play.  


Looking ahead, the EURUSD pair is likely to remain range-bound in the near term as the market brace for the various US and Eurozone economic reports, including the retail sales, PMI data and the highly anticipated NFP data report from the US.  

Overall, the EURUSD pair is likely to remain volatile in the coming sessions, with investors needing to keep a close eye on the latest economic data in order to gauge the outlook for the pair. 

Sources: TradingView, Trading Economics, Reuters, EUROSTAT, CNBC.