After gaining ground last week, the US dollar initially came under slight pressure earlier today. However, it regained momentum in the aftermath of a mixed US inflation report. Despite the nuanced inflation print, market expectations around interest rate policy remained largely unchanged. Investors continue to anticipate a slower pace of rate reductions, a sentiment that could further weigh on the EUR/USD pair—provided confidence in the Federal Reserve’s monetary approach remains intact.
Mixed Signals from US Inflation Data
The consumer price index for June presented a mixed picture. Headline CPI increased by 0.3% month-over-month and 2.7% year-over-year, surpassing both the previous 2.4% figure and the 2.6% forecast. However, core CPI (which excludes food and energy) showed a slightly softer reading, rising by only 0.2% month-on-month—below the expected 0.3%. The annual core rate stood at 2.9%, in line with expectations.
This mixed data has not allayed fears that inflation could remain sticky for longer. As a result, the Fed may hold off on aggressive rate cuts, although a possible move in September remains on the table.
Adding to the dollar’s bullish case, President Trump has proposed aggressive tariffs—35% on select Canadian goods and up to 30% on imports from Mexico and the EU—if no agreements are reached by August 1. These protectionist threats, combined with his expansive fiscal agenda, could drive inflation higher and bolster the dollar if market faith in US policy stays strong.
Euro Zone Data Shows Resilience, But the Euro Falters
Despite some encouraging macroeconomic indicators from the Eurozone, the euro slipped. Germany’s ZEW economic sentiment index rose to 52.7, outperforming both expectations (50.8) and the previous reading (47.5). Additionally, industrial production climbed 1.7% month-on-month, beating forecasts.
While these positive data points reflect a degree of resilience in the euro area, trade tensions are looming. The European Union has said it will retaliate on US products—ranging from aircraft to alcohol—should trade talks collapse or fail to yield agreements by the August 1 deadline.
Technical Outlook
Technically, EUR/USD breached the bullish trendline established since Q1, a development that bears are watching as the session wears on. Currently, the pair is testing a key support zone between 1.1570 and 1.1630—an area that served as resistance in both April and mid-June before the rally that followed.
Should prices fall decisively below this support today or in the coming days, the technical bias could shift bearish. On the upside, resistance lies at 1.1700 and 1.1750. A break above these levels would clear the way for bulls to target a fresh 2025 high above 1.1830.
By Fawad Razaqzada, market analyst with FOREX.com
Mixed Signals from US Inflation Data
The consumer price index for June presented a mixed picture. Headline CPI increased by 0.3% month-over-month and 2.7% year-over-year, surpassing both the previous 2.4% figure and the 2.6% forecast. However, core CPI (which excludes food and energy) showed a slightly softer reading, rising by only 0.2% month-on-month—below the expected 0.3%. The annual core rate stood at 2.9%, in line with expectations.
This mixed data has not allayed fears that inflation could remain sticky for longer. As a result, the Fed may hold off on aggressive rate cuts, although a possible move in September remains on the table.
Adding to the dollar’s bullish case, President Trump has proposed aggressive tariffs—35% on select Canadian goods and up to 30% on imports from Mexico and the EU—if no agreements are reached by August 1. These protectionist threats, combined with his expansive fiscal agenda, could drive inflation higher and bolster the dollar if market faith in US policy stays strong.
Euro Zone Data Shows Resilience, But the Euro Falters
Despite some encouraging macroeconomic indicators from the Eurozone, the euro slipped. Germany’s ZEW economic sentiment index rose to 52.7, outperforming both expectations (50.8) and the previous reading (47.5). Additionally, industrial production climbed 1.7% month-on-month, beating forecasts.
While these positive data points reflect a degree of resilience in the euro area, trade tensions are looming. The European Union has said it will retaliate on US products—ranging from aircraft to alcohol—should trade talks collapse or fail to yield agreements by the August 1 deadline.
Technical Outlook
Technically, EUR/USD breached the bullish trendline established since Q1, a development that bears are watching as the session wears on. Currently, the pair is testing a key support zone between 1.1570 and 1.1630—an area that served as resistance in both April and mid-June before the rally that followed.
Should prices fall decisively below this support today or in the coming days, the technical bias could shift bearish. On the upside, resistance lies at 1.1700 and 1.1750. A break above these levels would clear the way for bulls to target a fresh 2025 high above 1.1830.
By Fawad Razaqzada, market analyst with FOREX.com
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.