The EUR/USD investing showed strength during European trading hours as it surpassed the 1.1000 level, reaching a session high of 1.1036. Following the release of the US Consumer Price Index (CPI), the pair experienced an upward breakout. The June data revealed a monthly increase of 0.2%, falling below the anticipated 0.3%. On a year-over-year basis, the CPI rose by 3%, while the core annual reading came in at 4.8%, below market expectations of 5%.
These figures indicate a continued easing of price pressures, leading to a reduced need for further monetary tightening. With inflationary pressures gradually subsiding, the Federal Reserve may be approaching the end of its current tightening cycle. The central bank had previously hinted at the possibility of at least two more rate hikes of 25 basis points, which are already factored into market expectations.
Speculation Grows on the Federal Reserve’s Interest Rate Hike Plans
Following the news, financial markets experienced an increase in risk appetite, with Euro sell stocks extending their early rallies and Wall Street futures showing strong gains, challenging July highs.
The technical analysis supports the bullish momentum of the EUR/USD pair in the short term. The daily chart reveals positive readings and suggests further gains ahead as technical indicators continue to rise within positive levels. The 20-day Simple Moving Average (SMA) exhibits a bullish slope below the current level and above the longer-term averages.
US Inflation Data to Impact Market Sentiment and EUR/USD Outlook
In the 4-hour chart, technical indicators are firmly heading north, approaching overbought territory, without displaying signs of bullish exhaustion. The EUR swap rates remain comfortably above all its moving averages, with the 20-day SMA providing dynamic support around 1.0980.
Investors are eagerly awaiting the release of US consumer inflation data on Wednesday, followed by wholesale inflation data on Thursday. These figures are expected to be key drivers of EUR/USD investing in the short term. Currently, the pair maintains a bullish bias, supported by a weaker US Dollar and higher equity prices. However, the outcome of the US inflation data release may lead to a shift in market sentiment, potentially focusing more attention on the challenges faced by the Eurozone economy. Such a shift could exert downward pressure on the pair.
