German CPI Falls Short – Euro Faces Pressure Ahead of ECB Decisions Date: Monday, March 31, 2025

🗓 Economic Event Overview

• Event: German Prelim CPI (Month-over-Month)

• Date: Monday, March 31, 2025

• Time: All Day

• Actual: 0.3%

• Forecast: 0.4%

• Previous: Not published yet

• Source:
  🔗 Forex Factory Calendar
  🔗 CPI Event Page

🧩 Fundamental Breakdown – Inflation Softening Further

As a seasoned forex trader, I interpret this CPI miss as a confirmation signal of a wider trend: eurozone inflation is steadily cooling.

🔍 What This Means:

• Lower CPI suggests reduced pricing pressure

• Triggers speculation of ECB pivot or dovish shift

• May lower yield expectations on EUR-denominated assets

The ECB has recently signaled caution, but with core inflation dropping and energy prices stabilizing, the pressure to tighten is fading quickly. 

📊 Macro Trend Context – CPI Performance

📉 Interpretation: Inflation is stuck in a downward structure — if ECB doesn’t respond soon, real rates could rise unintentionally, hurting consumer demand and growth.

🧠 Fundamental Insight: What Is German Prelim CPI?

The Consumer Price Index (CPI) measures the average change in prices paid by consumers for goods and services. The German Prelim CPI m/m is released early and accounts for over 25% of Eurozone GDP — making it a leading inflation indicator in Europe.

Why It Matters:

• Inflation directly affects monetary policy decisions by the European Central Bank (ECB).

• A weaker CPI print signals slower inflation, reducing the urgency for the ECB to maintain high interest rates. 

📉 Current Data: CPI Misses Forecast

The latest reading of 0.3% missed the 0.4% forecast, continuing the trend of softening inflation across the Eurozone.

Although 0.3% is still in expansionary territory, the cooldown in inflation reflects:

• Lower energy prices

• Slower consumer spending

• Stabilizing wages 

📅 Past Performance Snapshot (Recent CPI Releases):

👉 5-month trend shows a consistent inability to meet or exceed inflation forecasts — clearly bearish for the Euro (EUR). 

🔍 Technical Analysis: EUR/USD and EUR Crosses

🔹 EUR/USD – Bearish Reversal Underway

• Daily Chart shows a rejection near the 1.0900 level

• Bearish engulfing pattern formed on the CPI news

• Support: 1.0760

• Resistance: 1.0900

• EMA(50) trending flat; MACD bearish crossover confirmed

• RSI near 45 — not yet oversold, more downside likely

📉 Bias: Short EUR/USD toward 1.0700 if price breaks and holds below 1.0760

Daily Timeframe Setup:

• Major Resistance: 1.0900

• Support Zone: 1.0760 → 1.0700

• Price rejected 1.09 three times (Feb-March), forming a triple top

• Broke below rising trendline from Dec 2024 lows = bearish structure

Indicators:

• MACD: Bearish crossover confirmed last week, histogram declining

• RSI (14): Now below 50, trending downward = selling pressure building

• 200 EMA: Price trading under both 50 and 200 EMAs = technical sell signal

📌 Trading Strategy:

• Entry: Sell pullbacks into 1.0800

• Stop: 1.0900

• Target: 1.0700 (initial), then 1.0620 (Fibonacci 61.8% from Oct low to Jan high)

🔹 EUR/GBP – Range Breakdown Potential

• UK CPI surprised to the upside earlier this month

• EUR/GBP now sitting on 0.8530 support

• A breakdown targets 0.8480, then 0.8400

📉 Bias: Favor GBP strength if inflation differentials widen further

4H and Daily Timeframes:

• Clear descending channel since mid-February

• Just broke key support at 0.8530

• Structure favors extension toward 0.8480

Indicators:

• Stochastic RSI: Bearish cross from overbought zone

• ADX: Rising above 25 = trend strength building

• EMA Confluence: Price below 20 & 50 EMAs = sell confirmation

📌 Trading Plan:

• Entry: Below 0.8530

• Stop: 0.8585

• Target: 0.8480, then 0.8400 if UK CPI holds firm next release 

🔹 EUR/CNY – Strong Yuan + Weak Euro = Sell Setup

• German CPI miss aligns with China’s strong PMI (released same day)

• EUR/CNY broke below 7.74 (double top neckline)

• Bearish continuation likely toward 7.68

📉 Bias: Short EUR/CNY with stop above 7.77 and target near 7.68

Weekly Chart Observation:

• Price formed a double top at 7.85–7.86 in Q1 2025

• Neckline at 7.74 now broken on strong bearish candle

• Price structure: Lower high + lower low sequence

Momentum Shift:

• RSI Divergence near the top (price higher, RSI lower)

• MACD bearish divergence with widening histogram

• Volume Spike during neckline break = high conviction move

📌 Trading Strategy:

• Short below 7.74 confirmed

• Target 1: 7.68

• Target 2: 7.62

• Invalidation: Close above 7.77

💡 Market Implications – What Traders Should Watch

If Inflation Keeps Falling:

• ECB may pivot toward rate cuts in Q2 2025

• Euro will face broad-based weakness, especially against USD, GBP, and CNY

• Risk-sensitive pairs like EUR/AUD and EUR/NZD may also trend lower

If April CPI Rebounds:

• Euro could stabilize, but needs multiple strong prints for a sustained recovery

• ECB will remain cautious, avoiding aggressive policy shifts 

🔮 Forecast – Euro in the Coming Weeks

🔮 FX Forecast – April Outlook

• If April CPI falls again → ECB may begin dovish messaging → deep EUR correction

• If Eurozone PMIs fall alongside CPI → EUR could underperform globally, especially vs. USD and CNY

• If US NFP or inflation rise → EUR/USD may hit 1.0600 zone by mid-April

• Geopolitical risks (Russia-Ukraine, energy prices) could add further downside risk

✅ Final Thoughts: Trade with Confluence

This is one of those key moments where fundamental weakness (soft CPI) aligns with technical breakdowns across multiple EUR pairs.

📌 As a trader, I’m prioritizing:

• High-conviction EUR/USD shorts

• EUR/CNY breakdown trades

• EUR/GBP bearish momentum on UK inflation strength

If you’re building a trade plan, now is the time to structure layered entries, use EMA/momentum confirmation, and trail stops below key support zones.