EUR/USD hovers around 1.1600 amid broad US dollar weakness

• EUR/USD begins the Asian session on the right foot, barely up 0.04%.
• Higher inflationary pressures weakened the US dollar, strengthened the euro and precious metals.
• US CPI annually base rose by 5.4%, higher than the 5.3% foreseen.

The EUR/USD advances as the Asian session begins trading at 1.1597, barely up 0.04% during the day at the time of writing. On Wednesday, the single currency dipped to the daily low at 1.1524 but bounced off the lows, courtesy of a higher US CPI reading, and finished around the 1.1590’s.

The market sentiment is upbeat, depicted by US equity indices, which rose between 0% and 0.77%, whereas Asian equity futures seesaw between gainers and losers as the Asian session kicks in.

On Wednesday, the US Bureau of Labor Statistics (BLS) released inflation numbers. The Consumer Price Index for September increased by 5.4%, higher than 5.3% estimated by analysts, suggesting that American citizens are struggling with higher prices. Further, the Core Consumer Price Index, which excludes food and energy costs, rose by 4%, unchanged.

The EUR/USD reaction to the news initially was towards a strong US dollar, but it seems that the market had already priced in the increase, selling off the greenback afterward, thus strengthening the euro.

EUR/USD Price Forecast: Technical outlook

Daily chart

The single currency is trading well below the daily moving averages, remains in a downtrend. Wednesday’s price action created a bullish-engulfing candle, meaning prices could be headed north, but strong resistance at the psychological 1.1600 needs to be reclaimed. Also, the October 4 high at 1.1639 adds another strong resistance layer for EUR/USD buyers to account for it.

In the case of a daily close above 1.1600, the first supply level would be the abovementioned 1.1639. A break of the latter could expose the 50-day moving average (DMA) at 1.1719 as the next resistance area.

On the flip side, a mover towards the downside is on the cards, supported by momentum indicators like the Relative Strength Index (RSI), which is at 41 below the 50-midline. Failure at 1.1600 would expose the 2021 year low at 1.1524. A break beneath that level could pave the way towards the July 16 low at 1.1370.

KEY ADDITIONAL LEVELS TO WATCH