Euro capped below 1.1660 ahead of German inflation data

EUR/USD is trading below the 1.1660 resistance level as traders wait for the next catalyst: German inflation data due later this week. The simple read is that the euro is stuck in a range, waiting for a trigger. The better market read involves the transmission from regional price pressures to European Central Bank policy expectations, which then flow through rate differentials and the dollar's broader trajectory.

German Inflation as the Policy Trigger

German inflation is the first major euro-area data point this month. A hotter-than-expected print would reinforce the narrative that the ECB cannot afford to stay accommodative for much longer. That would push German Bund yields higher relative to U.S. Treasury yields, narrowing the rate differential that has favored the dollar. A narrower differential typically supports EUR/USD by reducing the carry advantage of holding dollars.

A softer print would validate the ECB's cautious stance. The central bank has argued that current inflation spikes are transitory and driven by supply-side bottlenecks. If German data confirms that view, the market will push back expectations for any early rate hike, keeping the euro under pressure.

The 1.1660 Resistance and Its Significance

The 1.1660 level has acted as a technical ceiling for EUR/USD in recent sessions. It corresponds to a prior swing low from September and the 50-day moving average. A clean break above that level would signal that sellers are losing control and that the pair could target the 1.1700 zone. Failure to break on the back of a strong catalyst would reinforce the bearish structure and likely send the pair back toward 1.1500 support.