The EUR/USD pair consolidates above the 1.0500 area on Friday, still unable to advance beyond the 1.0600 mark, with the pair edging lower after the release of U.S. Producer Price Index data.
At the time of writing, the EUR/USD pair is trading at the 1.0540 area, posting a 0.16% daily loss, having retreated from a high of 1.0588 earlier in the session. The pair is virtually unchanged in the week, trading just a few pips above last Friday’s closing price, following two consecutive weekly gains.
The United States 10-Year bond yield bounced off a daily low of 3.45% and rose above 3.50%, fueling the greenback’s recovery. The DXY index is currently trading around 104.90, recovering from a low of 104.48.
Data from the U.S. showed producer prices grew at a 7.4% annual rate in November, matching the market’s expectations and slower than the 8.1% rate reported in October. The core PPI rose by 6.2% YoY, above the expectations of 6% but below the 6.7% rate printed in October.
On Tuesday, U.S. Consumer Price Index data could offer a better picture of the inflation situation and finish shaping the investors' expectations about Fed’s decision, which will be announced on Wednesday. According to the WIRP tool, a 50 bps rate hike is fully priced in, and investors are only betting around 10% odds of a larger 75 bps move. In addition, the swaps market is pricing in a peak policy rate of 5.0%.
The European Central Bank will announce its decision on Thursday, and expectations also point to a 50 bps increase in its main rates, although Lagarde & Co. could "surprise" with a 75 bps move.
From a technical perspective, the EUR/USD pair retains the short-term bullish bias despite indicators on the daily chart losing some traction. The RSI remains in positive territory with a slightly negative slope, while the MACD stands right above its midline.
On the upside, the immediate resistance level is given by the 1.0600, where the psychological level is reinforced by a descending trend line drawn from May 2021 high, followed by the 1.0700 area. On the other hand, the following support levels are seen at the 20- and 200-day SMAs at 1.0410 and 1.0350.