The EUR/USD pair is rising for the second day on Thursday as the greenback continues to correct lower after the steep, uninterrupted rally staged over the previous weeks. The U.S. released mixed economic data, while German inflation hit double digits for the first time in the euro era.
At the time of writing, the EUR/USD pair is trading at the 0.9785 area, 0.57% above its opening price, after bottoming at a daily low of 0.9635 and extending the bounce off the cycle low struck on Tuesday at 0.9535. The German annual inflation rate – measured by the CPI – reached 10% in September, the highest level in 70 years and higher than the market's consensus of 7.9%.
In response to soaring energy prices, German Chancellor Olaf Scholz announced a €200 billion relief plan to implement a gas price cap, which he described as a "defensive shield." After Russia decided to cut its gas supplies to Europe, prices soared, and Germany entered its worst energy crisis since the Second World War, forcing many companies to reduce production or even shut down entirely.
Across the pond, the greenback struggled to find demand despite mixed data and fragile market sentiment. The Q2 U.S. Gross Domestic Product final estimation contracted by 0.6%, just as expected.
On the other hand, the labor market continues to give signs of resilience. The Initial Jobless Claims for the week ended Sept. 23 decreased to 193,000 from the last reading of 209,000, while the markets expected 215,000.
Technical View - EUR/USD
From a technical perspective, the EUR/USD short-term bias remains bearish, although the selling pressure has eased over the last sessions as the pair has regained over 200 pips from the multi-year low scored on Tuesday. On the daily chart, the RSI points higher, although still below its midline, while the MACD prints lower red bars.
On the upside, the immediate resistance level is given by the 0.9800 psychological level and followed by the 20-day SMA at 0.9895. A break above this latter could improve the short-term perspective for the euro. On the other hand, the next support levels are seen at the 0.9635 area, followed by 0.9600 and the cycle low of 0.9535.