Euro strengthens as Eurozone sentiment improves ahead of German HICP

• EUR/USD rises after mixed Eurozone sentiment figures.
• Economic Sentiment improves to 95.0, beating expectations and supporting the Euro.
• German Retail Sales and HICP are the next key drivers with inflation likely to be especially important for ECB expectations.

EUR/USD rose above 1.1420 in the American session on Monday as investors digested mixed Eurozone sentiment figures and looked ahead to key German data. The latest Eurozone releases showed Business Climate in June at -0.38, weaker than the previous revised -0.27 reading. However, the Economic Sentiment Indicator improved to 95.0, beating expectations of 94.3 and rising from a revised 93.7, offering some support to the Euro.

Attention now turns to Germany’s preliminary HICP inflation figures. German HICP inflation slowed to 2.7% YoY in May from 2.9% in April, while the next flash estimate is due on Tuesday. A hotter-than-expected inflation reading could support the Euro by strengthening expectations that the European Central Bank (ECB) may need to keep policy restrictive for longer.

Markets will also watch German Retail Sales, which will provide a clearer view of household demand. The previous April reading showed Retail Sales falling 0.3% MoM, less than the 0.5% decline expected by analysts, but still pointing to weak consumer momentum.

Short-term technical analysis:

On the 4-hour chart, EUR/USD trades at 1.1421. The pair holds above the 20-period Simple Moving Average (SMA) at 1.1376 and a nearby horizontal level at 1.1415, hinting at a mildly constructive tone, although the broader trend remains capped by the 100-period SMA at 1.1494 overhead. The Relative Strength Index (RSI) at 58 suggests improving bullish momentum but not yet overbought conditions, leaving the pair in a neutral-to-slightly bullish near-term bias while price is squeezed between immediate support and initial resistance.

On the topside, initial resistance is seen at 1.1434, where a horizontal barrier could limit further gains ahead of the more significant 100-period SMA at 1.1494. On the downside, support emerges first at 1.1415, followed by 1.1401 and 1.1381. Those supports come before the technical floor defined by the 20-period SMA at 1.1376, a break of which would weaken the current constructive bias and open the door to a deeper pullback.

(The technical analysis of this story was written with the help of an AI tool.)