- Data on Friday showed that euro zone inflation rose more than expected in May.
- Core PCE Price Index Report Reveals Falling US Inflation
- Investors are eagerly awaiting the release of nonfarm payroll numbers.
The weekly outlook for EUR/USD is bullish as Eurozone inflation unexpectedly rises and US inflation falls.
EUR/USD Fluctuations
EUR/USD ended the week largely flat but well above its lows. The dollar started the week strong following the release of better-than-expected consumer confidence data, but the euro resumed gains after data showed US GDP fell in the first quarter, raising hopes that the Fed will cut interest rates in September.
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Additionally, data on Friday revealed that euro zone inflation rose more than expected in May. The consumer price index rose to 2.6% from 2.4%, beating expectations of a 2.5% increase. This slightly dampened expectations of an ECB rate cut next week, sending the euro higher. Further support came from a decline in U.S. inflation, indicated by the core PCE price index report.
Major events for EUR/USD next week
Next week, the U.S. will release data on manufacturing business activity, and investors will be closely watching the nonfarm payrolls report for clues about the Fed's policy stance, while in the Eurozone, traders will be monitoring the results of the European Parliament elections.
The U.S. employment report comes at a time of uncertainty about the Fed's policy outlook. The last monthly report revealed weak labor market conditions, raising hopes of an interest rate cut in the U.S. If another similar report is released, it could signal the start of a downward trend in the employment sector and pressure the Fed to start lowering borrowing costs.
EUR/USD Weekly Technical Outlook: Bulls Aim for New Highs Above Resistance Trend Line
On the technical front, the EUR/USD price has broken out of the strong bearish trend line and is aiming for a new higher high. Moreover, it is respecting the 22-SMA as support, indicating that the bulls have the upper hand. At the same time, the RSI is rising after finding support at the 50 level, which is a sign of strong bullish momentum.
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However, for the price to make a new high, it needs to break out of the resistance level at 1.0900. A breakout above this level will pave the way for the bulls to retest the resistance at 1.1101. However, if the resistance holds firm, the price may sink below the 22 SMA and retest the recently broken trendline before continuing its uptrend.
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