EUR/USD Approaches 1.1400 as ECB Rate Hike Expectations Decline Amid Bearish Sentiment

The EUR/USD pair weakened to around 1.1410 during early European trading on Wednesday, as cooling inflation in Germany dampened expectations for European Central Bank (ECB) rate hikes and reinforced a bearish tone against the US Dollar (USD).

Germany’s Consumer Price Index (CPI) inflation dropped to 2.3% in June, down from 2.6% in May, according to Destatis on Tuesday. This figure fell below market expectations of 2.5%. ECB President Christine Lagarde recently indicated that “forceful” policy action was unnecessary, citing declining energy prices and the absence of significant second-round effects, such as wage increases, that could further drive inflation.

Markets are now awaiting the Eurozone’s preliminary Harmonized Index of Consumer Prices (HICP) data. A stronger-than-expected result could provide near-term support to the euro.

Later on Wednesday, US economic indicators including the ADP Employment report and ISM Manufacturing Purchasing Managers Index (PMI) will be released, with the Nonfarm Payrolls (NFP) data expected to show 111,000 job additions in June drawing particular attention.

Technical Analysis:

The daily EUR/USD chart reflects a bearish near-term outlook, with the pair trading below the 20-day Bollinger simple moving average (SMA) and the 100-day moving average (MA). It hovers near the lower end of the Bollinger envelope, while the 14-period Relative Strength Index (RSI) around 36 signals weak, negative momentum rather than an oversold condition. Key resistance lies at the 20-day Bollinger SMA near 1.1485, followed by the 100-day MA at 1.1632 and the upper Bollinger band around 1.1650, forming a cluster of supply levels capping upward moves. On the downside, the June 29 low of 1.1381 serves as immediate support. A break below this level could open the door to further declines toward the lower Bollinger band near 1.1320, with the 1.1300 psychological mark as the next potential target.

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