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EUR/USD Holds Steady Above 1.1100 Ahead of Key U.S. CPI Report

Overview:
The EUR/USD pair remains stable above the 1.1100 mark during Tuesday’s European session, supported by a temporary pullback in the U.S. Dollar. Traders are positioning cautiously ahead of the highly anticipated U.S. inflation data, while improved sentiment in the Eurozone, as reflected in the latest ZEW survey, adds support to the euro.

EUR/USD Technical Outlook

At the time of writing, EUR/USD trades at 1.1111, holding firm just above the 50-day Simple Moving Average (SMA), which aligns with the 61.8% Fibonacci retracement of the most recent uptrend, between the 1.1080–1.1090 zone.

Support Levels:
- 1.1090 – Initial support at 50-day SMA and Fib 61.8%
- 1.1000 – Psychological and static support
- 1.0950 – Fib 78.6% retracement level
Resistance Levels:
- 1.1170 – Fib 50% retracement
- 1.1220 – 200-period SMA
- 1.1270 – Fib 38.2% retracement

If EUR/USD breaks below 1.1080, the pair could face selling pressure, potentially targeting 1.1000 or even 1.0950. On the upside, a clean break above 1.1170 would signal renewed bullish momentum.

Fundamental Analysis: Eurozone Sentiment Up, U.S. CPI in Focus

Eurozone Update:
The latest ZEW Economic Sentiment Index for the Eurozone jumped to 11.6 in May, up sharply from April’s -18.5 reading—showing a notable improvement in investor confidence. Meanwhile, Consumer Price Index (YoY) for the Eurozone held steady at 2.1%, aligning with expectations.

U.S. Outlook:
The U.S. Dollar Index (DXY) had rallied earlier this week on the back of improved risk appetite following the U.S.-China tariff agreement. However, the greenback is pulling back slightly ahead of the U.S. Consumer Price Index (CPI) release for April.

U.S. CPI Expectations:
- Monthly Core CPI: Expected at +0.3%
- Headline CPI (MoM): Forecasted at +0.3%
- Core CPI (YoY): Seen at 2.8%

A hotter-than-expected inflation print could strengthen the USD, potentially driving EUR/USD below the 1.1100 mark. Conversely, softer inflation data could weaken the dollar and support a bounce in EUR/USD.

Market Sentiment: Cautious Optimism Amid Inflation Risk

Although markets briefly celebrated the U.S.-China tariff de-escalation, uncertainty over global inflation remains a key concern. Today’s U.S. CPI release at 12:30 GMT will be pivotal for near-term EUR/USD direction.

Traders should watch for:

Volatility around the CPI release
Comments from the Federal Reserve regarding inflation outlook
Ongoing developments in U.S.-China trade talks

Conclusion:
EUR/USD remains at a crossroads, with immediate direction likely dictated by today’s U.S. inflation data. A dovish inflation surprise could fuel a euro rally, while higher inflation may reinforce USD dominance in the short term.

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Yasher Rizwan