EUR/USD Forecast: Pressure mounts on the ECB as EU inflation hits record highs

EUR/USD Current Price: 1.1324
The EU Consumer Price Index hit a record of 5.1% YoY in January.
The US ADP survey showed that the private sector lost 301K positions in January.
EUR/USD is poised to extend its gains in the near term, mainly once above 1.1345.
The EUR/USD pair found new strength and extended its rally above the 1.1300 figure on Wednesday to trade as high as 1.1329. The American dollar remained on the backfoot through the first half of the day, as stocks stayed in the green while government bond yields consolidated at the lower end of their weekly range.

The pair got a boost from EU inflation figures, as the annual Consumer Price Index jumped to 5.1% in January, largely surpassing the 4.4% expected and above the 5% previous. The reading came one day ahead of the European Central Bank monetary policy announcement, putting pressure on the central bank to respond with a tighter monetary policy.
So far, the central bank has maintained a cautious approach to monetary policy, expressing concerns about inflationary pressures although maintaining financial facilities for as long as needed. Furthermore, the ECB clarified that it would not touch rates before ending assets purchases, meant to continue until October. Nevertheless, EUR/USD broke higher on mounting speculation the central bank will have to readjust its view as soon as this week.

Across the pond, the US released MBA Mortgage applications for the week ended January 28, which rose 12%, and the January ADP Survey on private job creation, unexpectedly showing the loss of 301K positions in the month and sending the greenback further lower across the FX board.

EUR/USD short-term technical outlook
The EUR/USD pair recovered above the 50% retracement of its January decline, measured between 1.1482 and 1.1120 at 1.1300. The next Fibonacci resistance level comes at 1.1345. From a technical point of view, the daily chart shows that technical indicators keep recovering, with the Momentum still within negative levels and the RSI crossing its midline into positive levels. The pair is currently battling a flat 20 SMA, while below the longer ones, which maintain their bearish slopes.

The 4-hour chart shows that the pair may extend its gains, as technical indicators maintain their upward strength near overbought readings, as the 20 SMA turned frankly bullish far below the current level. At the same time, EUR/USD is currently crossing its 100 and 200 SMAs, converging directionless a few pips below the current level.

Support levels: 1.1300 1.1260 1.1220

Resistance levels: 1.1345 1.1390 1.1420