The EUR/USD currency pair reached a new weekly high of 1.0384 during European trading hours on Wednesday before turning red following the release of US inflation data. The US Consumer Price Index (CPI) increased by 0.5% on a monthly basis in January, prompting the pair to trade around 1.0320 post-announcement. The stronger-than-expected CPI figures bolstered the US Dollar, exerting downward pressure on the EUR/USD pair.
In January, annual core inflation climbed to 3.3%, intensifying risk aversion and enhancing the US Dollar's appeal as a safe haven. Consequently, the EUR/USD pair tested the 1.0300 region and appeared poised for a further decline. Technical indicators indicated bearish momentum, with the pair retreating from a flat 100 Simple Moving Average (SMA) and subsequently breaking below a bearish 20 SMA.
The Relative Strength Index (RSI) stood at 44, suggesting potential for additional slides if the pair breached the 1.0300 mark. The 100 and 200 SMAs showed downward momentum far above the shorter SMA, reflecting increasing selling pressure. Meanwhile, a mildly bullish 20 SMA provided dynamic resistance around the 1.0380 region for the second consecutive day.
During the American session on Wednesday, the EUR/USD pair faced bearish pressure, declining toward the 1.0300 level. The US Treasury bond yield surged nearly 2% on the day, climbing above 4.6%, in response to the robust January CPI data. This rise in bond yields further strengthened the US Dollar, adding to the downward trajectory of the EUR/USD pair.
From a technical perspective, the daily chart indicated a risk of further downward extension for the EUR/USD pair. Support levels were identified at 1.0300, 1.0260, and 1.0220, while resistance levels stood at 1.0340, 1.0385, and 1.0420.
The release of the US inflation data served as a catalyst for market movements, highlighting the sensitivity of currency pairs to economic indicators. Investors reacted swiftly to the CPI increase, with the stronger US Dollar weighing heavily on the EUR/USD pair.