Euro Extend Losses Following Strong U.S PPI

Fundamental Analysis

* PPI Heat: The euro continues to slide against the dollar following the release of stronger-than-expected U.S. PPI data. The U.S. Core PPI rose at a faster annual rate, coming in at 2.8%, surpassing both market expectations and previous readings of 2.7% and 2.6%. This hotter-than-anticipated producer inflation, coupled with persistently high inflation data, has raised concerns that inflation may remain entrenched, potentially prompting the Fed to slow the pace of interest rate cuts more than initially expected. Meanwhile, expectations of a 25-basis-point reduction in the ECB’s Main Refinancing Operations Rate are adding further pressure on the euro. ECB officials have hinted at more cuts in response to the EU’s ongoing economic challenges, having already lowered rates twice this year and expected to continue with 25-basis-point reductions in upcoming meetings.

Technical Analysis

* Technical Breakout: EURUSD was traded lower following prior retracement from the resistance level 1.09550. MACD which illustrate bearish momentum signal with the formation of death cross suggest the pair to further extend its losses.

*Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards the level 1.08850. Conversely, a potential reversal is also to be expected and the price could head back towards 1.09550.

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Potential Risks

Looking ahead, investors will be closely watching key data releases, including U.S. Retail Sales, with particular attention on the ECB’s Interest Rate Decision, where the central bank is widely expected to lower its rate.

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Monitoring

Stay updated on US and Eurozone data, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.