EUR/USD trapped in 50-point range

Eurozone inflation slowed in December, putting the annual rate at 0.8%. 

The European Central Bank (ECB) sees no immediate risk of deflation, despite October’s four-year low which persuaded it to cut the interest rate to 0.25% in November.

Over in the US the cost of living has climbed by the most it has risen in six months, indicating that the rate is heading towards the Federal Reserve’s goal. Much of this can be put down to the fact that gas prices have increased.

Unemployment claims fell by 2,000 to 326,000 this week, which has thrown some doubt on the reliability of the most recent non-farm payrolls number. This has helped to buoy the greenback.

The EUR/USD has spent the day in a 50-point range, with support coming in at 1.36, while the 1.3650 level (23.6% retracement from the December/January hi/low range) has capped any upside. The descending trend-line from the 1.38 metric appears to be keeping a short-term bias to euro downside at this point.

The overall trend from the July lows at 1.2750 is still intact, and only a close below the 1.3580 level would negate this. Such an occurrence could bring 1.3490 level into focus.

Spot FX EUR/USD chart

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