EUR/USD turned lower on Friday after technical rejection from 1.06

• EUR/USD started Friday with hopeful gains, but slumped back into the low side.
• European inflation figures showed contraction on the near end of the curve.
• Core monthly HICP inflation dipped to its lowest level since February.

EUR/USD kicked Friday off with a mild rally into the 1.0600 handle as broader markets took advantage of the US holiday session to sell off the Greenback and bid up riskier assets, but another contraction in key pan-European inflation figures pulled the plug on Fiber bulls. Despite an intraday softening of the Euro's stance, EUR/USD is poised for its first weekly gain in a month.

According to the Harmonized Index of Consumer Prices (HICP), headline European inflation sank to -0.3% in November, falling from the previous month's 0.3%. Core HICP inflation also declined to -0.6% MoM compared to the previous print of 0.2%, sending core monthly inflation measures into contraction territory for the third time this year and the lowest print since February.

Annualized HICP inflation ticked higher, with core HICP rising to 2.8% YoY from the previous 2.7%, but the bump in yearly inflation is likely due to previous bumps in the road as the European Central Bank (ECB) grapples with whipsaw inflation prints. ECB officials noted that still-declining inflation metrics bode well for further rate cuts. Still, too-steep of an inflation easing curve is raising investor concerns of a deepening slowdown within the broader European economy.

EUR/USD price forecast

The Euro's bullish turnaround from two-year lows is already running into trouble as intraday bidding runs aground of the 1.0600 handle. Bullish momentum has achieved a moderate 2.5% recovery from November's bottom bids near 1.0330, but momentum remains limited. Looking higher up, a rapidly-descending 50-day Exponential Moving Average (EMA) falling through 1.0750 while the 200-day EMA rolls over into bear country near 1.0840.

EUR/USD daily chart