EUR/USD edges higher and clings to 1.0700 amid dovish Fed comments

• EUR/USD advances on dropping US Treasury yields and Chicago Fed’s President Goolsbee's comments.
• US PPI indicates the continuation of the disinflationary process.
• Eurozone dodges a recession in Q4 2023; Lagarde’s speech eyed.

The EUR/USD climbs during the North American session registers 0.08% gains courtesy of a drop in US Treasury bond yields after Tuesday’s inflation report in the United States. Also, stronger-than-expected Eurozone data sponsored the jump to a daily high of 1.0719. At the time of writing, the pair exchanges hands at 1.0716.

US inflation decelerates but stays above Fed’s 2% goal

The US Bureau of Labor Statistics (BLS) revealed that inflation is anchored above the 3% threshold in headline and core inflation. Recently, the Bureau revealed that prices paid by producers – also known as PPI – plunged to -0.2%, exceeding November’s drop. The core PPI stood at -0.1%, both figures on a monthly basis, suggesting that inflation indeed is cooling down.

Besides that, falling US Treasury bond yields are weighing on the Greenback. The US Dollar Index (DXY), which tracks a basket of the currency against the other six, falls 0.02%, down to 104.84.

As of writing, Chicago’s Fed President Austan Goolsbee justified that if inflation comes a bit higher over the next months, it would be consistent with our (Fed) path back to target. Goolsbee emphasized his posture to ease policy even though inflation isn’t in the 2% threshold in yearly figures.

Across the pond, the Gross Domestic Product in the Eurozone was flat in Q4 at 0% on a quarterly basis, while compared to 2022, it rose 0.1%. Despite that, Germany, the largest economy of the block, contracted -0.3% QoQ.

In the European session, European Central Bank (ECB) Vice-President Luis De Guindos commented that incoming data signals economic weakness in the near term, and emphasized the disinflationary process continues.

What to watch?

The Eurozone scheduler will feature the Balance of Trade for December and Christine Lagarde’s speech. On the US front, Retail Sales, Industrial Production, and Initial Jobless Claims are awaited to give direction to the EUR/USD pair.

EUR/USD Price Analysis: Technical outlook

The pair is downward biased despite signaling that it could be bottoming at around the 1.0690s-1.0700 area. However, the Relative Strength Index (RSI) signals bears are in charge, and the EUR/USD trade below the daily moving averages (DMAs). That said, the major first support would be 1.0700, followed by the 1.0694 February 14 low. Once those two levels are cleared, the next stop would be intermediate support at a November 10 low of 1.0656. On the other hand, if buyers reclaim the 1.0750 area, they can challenge a resistance trendline that passes around the 1.0755/70 area.