EUR/USD falls back as US CPI inflation data prints above expectations

• EUR/USD tested lower on Thursday, finding the 200-day EMA.
• Euro data remains thin this week, leaving Fiber to churn on US data.
• Coming up on Friday: US PPI inflation, UoM consumer sentiment figures.

EUR/USD managed to maintain a finger grip on chart paper north of the 1.9000 handle. Fiber wound up closing lower, but recovered just enough to pull back from a deeper test of the 200-day Exponential Moving Average (EMA) near the 1.0900 handle.

Headline US CPI inflation fell less than expected through the year ended in September, declining from 2.5% to 2.4%. Median market forecasts had called for a print of 2.4% YoY. On the other hand, core US CPI inflation ticked higher YoY in September, rising to 3.3% from the previous 3.2%. 

US Initial Jobless Claims unexpectedly rose for the week ended October 4, climbing to 258K week-on-week and clipping the highest rate of new jobless benefits seekers since June of 2023. 

Mixed rate-impacting data flummoxed rate markets on Thursday. Rising unemployment figures bolster hopes for rate cuts as the Federal Reserve (Fed) looks to keep the US labor market afloat, while still-hot inflation makes it harder for investors to expect a faster pace and depth of rate trims.

Meaningful European economic data points are almost entirely absent on Friday, leaving Fiber traders at the mercy of overall Greenback flows to wrap up the trading week.

US Producer Price Index (PPI) inflation will follow up during the US market session. September's core PPI print for the year ended in September is expected to accelerate to 2.7% YoY from last month's 2.4%.

University of Michigan 5-year Consumer Inflation Expectations for October will also print on Friday, alongside the UoM Consumer Sentiment Index. The UoM sentiment index is expected to grind higher to 70.8 from 70.1, while 5-year consumer sentiment expectations were unable to price out a forecast, though the indicator did move higher in the previous month.

EUR/USD price forecast

The EUR/USD pair is trading around 1.09343, experiencing a slight decline of 0.05% for the day as selling pressure continues to weigh on the currency pair. The price action is testing the 200-day Exponential Moving Average (EMA) at 1.09036, a critical level of support that could determine the pair's next directional move. A break below this level could accelerate downside momentum, potentially opening the door to further declines toward the 1.08500 level, a key psychological barrier. The 50-day EMA, currently at 1.10289, has now become a resistance level after the recent bearish break below it.

The overall trend seems to be shifting towards a more bearish outlook in the short term. The steep decline from the recent highs near 1.1200 indicates that bullish momentum has largely faded. The price has consistently printed lower highs and lower lows, signaling a clear downtrend. Traders will likely keep an eye on how the pair reacts around the 200-day EMA in the coming sessions, as a sustained move below this level could confirm a broader shift in market sentiment toward the downside.

In the broader context, the EUR/USD's price action reflects a market that is increasingly sensitive to economic data releases and central bank decisions. The pair's recent decline coincides with a stronger U.S. dollar, driven by expectations of tighter monetary policy from the Federal Reserve. Eurozone economic data, such as inflation and growth figures, will be key in determining whether the euro can find support at current levels or if further downside risks will materialize. Traders should watch for any signs of reversal, but for now, the technical setup points toward additional weakness.

EUR/USD daily chart