EURUSD climbs above 1.0350 after a soft US PPI report

• A soft US Producer Price Index further cements Federal Reserve officials’ case for slowing the pace of tightening.
• Eurozone’s GDP beat estimates, though it continues to decrease as an upcoming recession looms.
• EURUSD will extend its losses if it dives below 1.0360 after struggling at the 200-DMA.

The EURUSD is climbing in the North American session, though it remains beneath the highs of the day at 1.0481, reached on the release of a softer-than-expected Producer Price Index (PPI) for the United States. That said, PPI and CPI report in the US, flashing signs that inflation is cooling down, added to Federal Reserve’s policymakers laying the ground for a slower pace of rate hikes, spurred a risk-on impulse. At the time of writing, the EURUSD is trading at 1.0364.

Inflation in the US is cooling as CPI and PPI ease in October

Global equities continue to rally, between 0.70% and 2.10%. The US Department of Labor (DoL) reported that PPI for October rose by 8% YoY, below 8.3%, while excluding volatile items, the so-called core PPI jumped by 6.7% YoY, less than 7.1% foreseen. Now that CPI and the PPI reports are in the rearview mirror, suggesting that US inflation is cooling, Federal Reserve (Fed) policymakers are lying the ground to decrease the size of rate hikes from 75 bps to 50. Therefore, US Dollar (USD) weakened on the release, as shown by the EURUSD spiking towards a new 5-month high at 1.0481, piercing on its way north of the 200-day Exponential Moving Average (EMA) at 1.0427, before retreating to the current exchange rates.

Meanwhile, a slew of Fed members crossed newswires led by Lisa Cook, which said that inflation remains too high and that the central bank’s focus will be addressing inflation. The Philadelphia Fed President Patrick Harker said that he’s not “overly worried” about inflation expectations and suggested that the Fed could pause as long as the US central bank stays committed to tame inflation.

Aside from this, the New York Fed Empire State Manufacturing Index rose by 4.5, smashing expectations for a contraction of 6, though the PPI report overshadowed it.

On the Eurozone front, European Central Bank (ECB) member Francois Villeroy said that the ECB would probably keep raising rates beyond the 2% level. He added that monetary policy divergence around the globe exerts downward pressures on the Euro and more on the Japanese Yen (JPY).

Data-wise, the Eurozone economic calendar featured the Eurozone’s GDP for Q3, with data showing that the block grew at 2.1% YoY, aligned with estimates but below Q2’s number. At the same time, the ZEW Economic Sentiment Index for the Euro area and Germany improved, though it remained negative, with both figures reaching -36.7 from -59.7 and -59.2, respectively.

EURUSD Price Analysis: Technical outlook

Therefore, the EURUSD is neutral-to-upward biased and briefly pierced the 200-day EMA at 1.0427 but retreated at around the London Fix, diving below 1.0360. if the EURUSD does not achieve a daily close above the November 11 high of 1.0364, it will exacerbate a fall beneath the 1.0300 figure. That said, the EURUSD’s next support would be the 1.0200 figure, followed by the 100-day EMA at 1.0026.