EUR/USD reversed directions last week, posting slight gains. There are three events on the calendar this week, including Eurozone CPI. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

The ECB policy meeting was a significant one, with the bank announcing that it would accelerate its purchase of Eurobonds under its emergency PEPP program in response to rising yields. The ECB did not specify the amount or time frame of the new purchases. The euro’s response to this move was muted.

German Industrial Production contracted by 2.5% in January, its first decline in five months. There was better news from Eurozone Industrial Production, which rebounded with a gain of 0.8%, up from -1.6% beforehand. Eurozone GDP for Q4 was revised downwards to -0.7%, down from -0.6%.

In the US, inflation ticked higher in February, much to the relief of the market, which has been concerned that pent-up demand could lead to runaway inflation. Core CPI edged up to 0.1%, up from 0.0%. Headline CPI ticked up to 0.4%, up from 0.3%. The week ended on a positive note, as UoM Consumer Sentiment for March rose from 76.2 to 83.0. Consumer confidence has risen to its highest level in 12 months.

EUR/USD daily chart with support and resistance lines on it. Click to enlarge:

1. French Final CPI: Tuesday, 7:45. Inflation in the eurozone’s number two economy is expected to confirm the initial estimate of -0.1%. This decline comes after four successive declines.
2. German ZEW Economic Sentiment: Tuesday, 10:00. Confidence among financial experts has been accelerating, and the upward trend is projected to continue in March with a forecast of 74.2.
3. Inflation Report: Wednesday, 10:00. There are growing concerns that eurozone inflation is rising, and this was alluded to by ECB President Lagarde in her decision to buy more Euro-bonds. The final readings for February are expected to confirm the initial estimates of 0.9% for headline CPI and 1.1% for Core CPI.

EUR/USD Technical analysis

Technical lines from top to bottom:

• We start with resistance at 1.2272.
• 1.2193 is an important monthly resistance line.
• 1.20052 is next.
• 1.1973 is an immediate resistance line.
• 1.1846 (mentioned last week) is the first support level.
• 1.1667 is the final support line for now.

I remain bearish on EUR/USD

The eurozone continues to struggle with a weak economy and a sluggish vaccine rollout in response to COVID-19. The US recovery has been deepening and the massive Biden stimulus plan is expected to boost the domestic economy.