Inflation in the eurozone slowed to 8.5% and the core indicator accelerated to 5.6%. Meanwhile, the unemployment rate remained at 6.7%. Mixed inflation data puzzled traders. At the same time, the British pound moved almost in sync with the euro. This means that the sterling either followed the euro's suit or traders simply ignored the macro reports. Both currency pairs would have shown weakness anyway.
An increase in consumer prices on the back of the tightening cycle is seen as a positive factor for the euro. The slower inflation drops, the longer the ECB stays hawkish. This factor has been driving prices for a long time. However, its effect has eased now. Yesterday, the pair was bearish. In other words, traders no longer believe that the ECB could bring inflation to the target level in the near future as well as they no longer believe in a hawkish continuation.
In the H4 time frame, EUR/USD consolidated below the ascending trend corridor. Because the pair left the corridor it traded in since October, sentiment turned bearish. The target is seen at 1.0201. The bearish divergence of the CCI allows us to count on a resumption of the downtrend.
Commitments of Traders (COT):
Over the reporting week, speculators opened 9,464 long positions and 2,099 short ones. The bullish sentiment has increased somewhat. Speculators currently hold 238,000 long positions and 103,000 short ones. The pair is on the rise in line with the latest COT report. At the same time, the number of longs exceeds that of shorts almost 2.5 times. Over the past several weeks, the pair has been on the rise despite having little support from fundamental factors. Anyway, the outlook for EUR/USD is going to be positive for as long as the ECB raises rates by 0.50%.
Macroeconomic calendar:
Eurozone: Services PMI (09-00 UTC)
United States: Services PMI (14-45 UTC); ISM Non-Manufacturing PMI (15-00 UTC).
On March 3, the macroeconomic calendar contains only reports on business activity in the eurozone and the US. Traders should also pay attention to the ISM Non-Manufacturing PMI. Fundamental factors are likely to have a mild effect on trader sentiment today.
Outlook for EUR/USD:
Consider selling after the close below 1.0609 with the target at 1.0483 in the 1-hour time frame or on a rebound from the upper line of the descending corridor, targeting 1.0609. Buying could become possible after the close above 1.0614 in the 1-hour time frame, targeting 1.0725.