EUR / USD clings to small daily gains near 1.2130 while USD remains on the defensive

• EUR / USD is rising for the fourth day in a row.
• The US dollar index falls after the US CPI data.
• Lagarde says the ECB can expand the PEPP if necessary.

The pair EUR/USD it is trading in a relatively tight range above 1.2100 but still on track to close the fourth day in a row in positive territory. At time of writing, the pair was up 0.15% towards 1.2133.

The inflation report released by the US Bureau of Labor Statistics weighed on the dollar in the early trading hours of the US session and allowed the EUR / USD to rise modestly.

Monthly data showed that the Basic Consumer Price Index (CPI) in the US fell to 1.4% annually in January from 1.6% in December and disappointed the market expectation of 1.5%. With the initial market reaction, the US Dollar Index fell to a two-week low of 90.25 and was last seen losing 0.1% to 90.34.

On the other hand, Christine Lagarde, president of the European Central Bank (ECB), said on Wednesday that it was not the time to stop fiscal support. “The ECB can expand the Pandemic Emergency Purchase Program (PEPP) if necessary,” Lagarde added, possibly limiting gains from the shared currency.

Later in the session, FOMC Chairman Jerome Powell will deliver a speech on the state of the economy and political outlook.

Technical perspective

Assessing the short-term technical outlook for EUR / USD, “EUR / USD remains strong after the bullish ‘reversal day’ from our target at 1.1945 / 14 – the 23.6% retracement of the entire 2020 uptrend / 2021 and the first ‘measured upper target’ – and it has easily overcome the 38.2% retracement of the January / February drop at 1.2104, “Credit Suisse analysts noted.

“This causes immediate risk to remain higher with resistance seen below at the 55-day average at 1.2138, ahead of price resistance from late January highs at 1.2156 / 90, and this is expected to be a limitation at the beginning to define the ceiling of a range, “added the analysts.

Technical Levels