EUR/USD Forecast: Bulls lack conviction, Eurozone CPI eyed for fresh impetus

The EUR/USD pair regained positive traction on the first day of a new week, albeit struggled to capitalize on the move and retreated around 50 pips from the daily top. The emergence of some fresh selling around the US dollar – amid a modest recovery in the equity markets – led to the pair's initial leg of the intraday positive move. The shared currency got an additional boost following the release of hotter-than-expected German consumer inflation figures. According to the preliminary readings, the headline German CPI rose 0.6% MoM in June and the yearly rate accelerated to 0.9% from 0.6% previous.

Separately, the Eurozone Economic Sentiment Indicator rose to 75.7 in June form 67.5 but missed consensus estimates pointing to a reading of 80.0. Nevertheless, the rise of +8.2 points was still the largest month-on-month increase on record and remained supportive of the bid tone surrounding the pair. However, growing worries about the ever-increasing coronavirus cases helped revive the greenback's safe-haven status and kept a lid on any strong gains. Adding to this, upbeat US macro data further underpinned the USD and contributed to the pair's intraday pullback from levels just ahead of the 1.1300 mark.

Despite the pullback, the pair ended the day with modest gains and held stable just below mid-1.1200s through the Asian session on Tuesday. Moving ahead, market participants now look forward to the flash version of the Eurozone consumer inflation figures for June for some impetus. Meanwhile, the US economic docket highlights the release of Chicago PMI for June and the Conference Board's Consumer Confidence Index. Later during the US session, the Fed Chair Jerome Powell, along with Treasury Secretary Steven Mnuchin, will testify before the House Financial Services Committee. This might influence the USD price dynamics and produce some meaningful trading opportunities.

Short-term Technical outlook

From a technical perspective, nothing seems to have changed much for the pair and the formation of a bearish double top still favours bearish traders. However, it will be prudent to wait for a convincing breakthrough the neckline support, around the 1.1200-1.1190 region, before positioning for any further depreciating move. Below the mentioned support, the pair is likely to accelerate the fall towards the 1.1100 round-figure mark before eventually dropping to test the very important 200-day SMA, currently near the 1.1030 region.

On the flip side, immediate resistance is pegged near the 1.1300 mark, above which bulls might target to retest the 1.1350 supply zone. Some follow-through strength will negate the bearish set-up and trigger some near-term short-covering move. The pair might then jump to reclaim the 1.1400 round-figure mark. The momentum could further get extended back towards testing YTD tops, just ahead of the key 1.1500 psychological mark.