EUR/USD Forecast: Bulls maintain the pressure of Fed rate cut bets

EUR/USD Current price: 1.0938

• The Eurozone confirmed June annual inflation at 2.5%, as previously anticipated.
• Bets that the Federal Reserve will cut interest rates in September hit the US Dollar.
• EUR/USD bullish momentum persist, near-term signs of a potential correction.

The EUR/USD pair peaked on Wednesday at 1.0944, its highest since mid-March, as the US Dollar’s demand remains subdued despite a souring market mood. Stock markets are in retreat mode amid news that the United States (US) is considering imposing severe trade restrictions on Chinese semiconductor technology companies. As a result, the tech sector plummeted, leading to a slump among major indexes.

On the other hand, news that the  United Kingdom (UK) Consumer Price Index (CPI) rose 2.0% in the year to June, steady at the Bank of England (BoE) target, fueled high-yielding currencies vs the Greenback. At the same time, the Eurozone confirmed the Harmonized Index of Consumer Prices (HICP) at 2.5% YoY in June, as previously estimated.

However, most of the US Dollar's weakness comes from the fact that speculative interest resumed betting on a Federal Reserve (Fed) rate cut coming as soon as September. According to the CME Fed WatchToll, the odds for a rate cut have stood at 100% since early this week.

The US released June Building Permits, which rose 3.4% in the month, while  Housing Starts in the same period were up 3%. Coming up next, the country will publish Capacity Utilization and Industrial Production, while Federal Reserve (Fed) policymaker Christopher J. Waller will hit the wires.

EUR/USD short-term technical outlook

The EUR/USD pair is up for a sixth consecutive day and gives no signs of giving up. From a technical perspective, the pair is approaching overbought conditions yet firmly bullish. In the daily chart, the pair keeps advancing above all its moving averages, with the 20 Simple Moving Average (SMA) maintaining its positive momentum and about to cross above directionless 100 and 200 SMAs, converging at around 1.0790. Meanwhile, technical indicators retain their upward strength at multi-week highs.

For the near term, the 4-hour chart shows EUR/USD is already losing momentum but far from turning bearish. Technical indicators are retreating modestly from overbought readings, but the pair keeps finding buyers around a bullish 20 SMA, currently at around 1.0900. Finally, the 100 SMA is gaining upward traction after surpassing the 200 SMA, both below the 1.0800 mark, a sign of the latest EUR/USD strength.

Support levels: 1.0900 1.0865 1.0820

Resistance levels: 1.0945 1.0990 1.1020