EUR/USD forms bullish flag after mild EU inflation data

The EUR/USD rose slightly after the relatively mild European consumer inflation numbers. It rose to 1.1912, which is slightly higher than Tuesday’s low of 1.1880.

EUR/USD chart

European Union mild inflation

Consumer prices were relatively stable in the Eurozone in February. According to Eurostat, the headline annual inflation in the Eurozone rose by 0.9%, down from 1.2% in 2020. In the EU, the CPI rose to 1.3% from 1.2% in the previous month. 

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Countries with the highest inflation were Poland, Hungary, and Romania, where prices rose by 3.6%, 3.3%, and 2.5%, respectively. The top laggards were Greece, Slovenia, and Cyprus. 

Further data showed that construction production increased by 0.9% in the European Union in January. These numbers will likely keep rising as the EU countries continues their recovery process. Many of them like Germany and France have already started their vaccination drive. 

These numbers came a week after the European Central Bank (ECB) made its interest rate decision. The bank left interest rates and its 1.8 trillion euro stimulus package unchanged.

The EUR/USD will later react to the important US building permits and housing starts numbers. Most importantly, analysts are watching the Federal Reserve interest rate decision that will come out during the American session. As the most liquid currency pair in the world, the EUR/USD will see significant action if the bank changes its tone.

The pair is rising as US bond yields continue to rally. The yield on the 10-year government bond has risen by 1.32% to 1.644% while the 2-year has risen by 2.7% to 0.15%. The same trend is happening in Europe. In France, Germany, and Spain, the benchmark 10-year has risen to -0.072%, -0.32%, and 0.32%, respectively.

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EUR/USD forecast

EUR/USD technical chart

The EUR/USD price bottomed at 1.1835 on March 9. It then rebounded and reached the 61.8% Fibonacci retracement level at 1.1990. It is trading at 1.1913, which is slightly below the 25-day and 15-day exponential moving averages. The pair seems to be forming a bullish pattern, which is usually bullish, as you will find in our free online forex course

Also, it seems to be in the second part of the impulse Elliot wave. Therefore, the pair may resume the upward trend in the near term. If this happens, the next level to watch will be the 50% retracement at 1.2038.

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