The EUR/USD pair failed to rally despite stronger-than-expected Eurozone inflation data, suggesting that investors remain cautious about the euro’s strength amid mixed economic signals from the region. On one hand, inflation pressures appear to be re-emerging, while on the other, cyclical sectors such as manufacturing continue to show weakness, and the labor market is displaying increasingly concerning signs of slowing momentum.

The preliminary May CPI report showed headline inflation rising by 3.2% year-over-year, in line with forecasts and unchanged from the previous reading. However, core CPI surprised to the upside, accelerating to 2.6% versus expectations of 2.4% and the prior reading of 2.2%. EUR/USD is currently trading in the middle of an upward-sloping price channel. The key resistance zone appears to be located around 1.167–1.170, while 1.160 remains an important support level.

The EMA50 and EMA200 moving averages (orange and red lines) are positioned close to current market levels, suggesting that the 1.164 area could act as a short-term momentum pivot. Given that the current relatively modest recovery follows a sharp decline from the 1.20 area, it remains possible that the pair is forming a bearish flag pattern. A break below 1.160 would strengthen that technical scenario and potentially signal a continuation of the broader downtrend.

Source: xStation5

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