EUR/USD is currently trading 0.11% in the red, as it struggles near 1.1717. Of major significance to traders is the upcoming release of the German Harmonized Index of Consumer Prices (HICP) data. Scheduled for 13:00 GMT, this preliminary data is critical as it could significantly impact market expectations regarding the European Central Bank’s (ECB) monetary policy outlook. Germany, as the largest economy in the Eurozone, wields significant influence. When its inflation metrics rise and fall, the impact is felt throughout the entire region.
EUR/USD pair has been on razor-sharp pressure these recent weeks. This pressure comes uniquely from the development of a Double Top formation. This technical signal signals a possible reversal in price direction, which makes traders fear further declines. Additionally, the 20-period Exponential Moving Average (EMA) has been consistently declining. This trend makes the short term bias a persistent back foot.
Current Market Sentiment
The 14-period Relative Strength Index (RSI) sits at 46. This indicates a fading of the euro’s upwards strength against the dollar. Sellers are still very much in control of the market, despite the stagnant average days on market. This solid place heightens the chances to forcing EUR/USD lower, possibly to key help close to 1.1600, a December 2025 low.
EUR/USD continues to trade beneath the 20-period EMA on the four-hour timeframe. Today’s average is at a high 1.1726, which is capping any possible rebounds on the intraday. This continued underperformance suggests that traders remain cautious ahead of the upcoming data release, reflecting broader uncertainties in the market.
Anticipating the HICP Data
The preliminary German HICP data will reportedly show a large 0.4% jump in prices from the previous month. This comes on the heels of a 0.5% deflation from last month. This kind of change would certainly raise the bar for what can reasonably be expected from ECB monetary policy action. Core inflation—which central banks like to keep at around 2%—is especially important in gauging what future interest rate changes will be. Whether this data will ultimately be positive or negative will indicate if inflationary pressures in Germany are easing or deteriorating.
On the same day, Eurostat will release preliminary Eurozone HICP data for December. This announcement coincides with the German figures. This will help inform a wider understanding of inflationary trends within and between member states and what this means for the future direction of economic policy.
Wider Economic Implications
It is the Eurozone’s largest country by area and the highest by both population and trade volume. Its economic indicators have an outsized impact on market sentiment. A decisive close above the December 16 peak at 1.1804 can unlock further upside potential. This might take us in the direction of the high from September 17 at 1.1919. On the flip side, very disappointing inflation data could increase current pressures on EUR/USD and push prices down.
Traders will be on the lookout for CPI figures from other German states such as Bavaria and Baden-Württemberg. This crucial data drops Wednesday for the first time. These numbers can provide important context as to what is happening to regional economies and how that might be affecting national inflation measures.