EUR/USD retreats slightly from recent highs as buyers ease back

• EUR/USD eased slightly on Wednesday, slipping back below 1.0900.
• EU data remains functionally non-impactful as US data weighs.
• US CPI inflation eased more than expected in February, building hopes for PPI figures.

EUR/USD bidders eased off the gas pedal on Wednesday, allowing Fiber to retreat around one-third of one percent and pushed bids back below the 1.0900 major price handle. Despite a significant recovery in EUR/USD over the last couple of weeks, buyers are settling back down after readjusting Fiber by over 5% in less than two weeks.

European economic data is barely registering on the needle this week as trade war concerns and US inflation data rule the roost. On Wednesday, the US implemented a worldwide 25% tariff on all steel and aluminum imports, marking a significant escalation in President Donald Trump's aim to simultaneously initiate a trade war with all of the nation's allies.

In February, US Consumer Price Index (CPI) inflation fell more sharply than expected, with headline CPI at 0.2% month-over-month and 2.8% year-over-year, slightly quicker than predictions. While this remains above the Federal Reserve's (Fed) 2% target, it has raised hopes for rate adjustments. The CME's FedWatch Tool now indicates better than even odds for a Fed rate cut in June, up from July.

Nearly four years have passed since US headline inflation hit "transitory" levels. Aside from a brief slowdown in Q3 2024, key inflation metrics have remained steady since June 2023, when the post-Covid inflation rate eased to 3% annually.

Despite cooler CPI readings in February, there are signs of potential challenges for policymakers: gasoline and fuel oil prices fell by 3.1% and 5.1%, but natural gas prices surged by 6%. Additionally, shelter price inflation rose by 4.2% year-over-year, while a small 0.3% decrease in vehicle prices masked a 2.6% rise in food price inflation compared to last year.

EUR/USD price forecast

EUR/USD looks set to end its recent bull run, closing lower and slipping back below 1.0900 just as quickly as it jumped the major handle in the first place. However, Fiber has climbed nearly 7.6% bottom-to-top from the last major swing low near 1.0175, with bulls easily snapping the 200-day Exponential Moving Average (EMA) in the process.

EUR/USD is now running aground of technical resistance from the 1.0900 handle, a technical region that flummoxed Euro bulls the last time around back in October and November of last year.

EUR/USD daily chart