EUR/USD Forecast: Bulls take their chances beyond 1.1000

EUR/USD Current price: 1.1038

• The US Consumer Price Index eased further in July, fueling the market’s optimism.
• Investors are pretty much convinced about an upcoming rate cut from the Fed.
• EUR/USD trades at its highest since January and aims to extend the advance.

Optimism reigned throughout the first half of the day, putting pressure on the US Dollar. The EUR/USD pair surged above the 1.1000 threshold and traded as high as 1.1034 during the European session and ahead of first-tier data. 

The upbeat mood resulted from mounting speculation that the United States (US) Consumer Price Index (CPI) will support an interest rate cut when the Federal Reserve (Fed) meets in September. The release of the softer-than-anticipated US Producer Price Index (PPI) on Tuesday acted as a catalyst, sending high-yielding stocks firmly up.

The US inflation data finally came out and initially hit the USD. The CPI rose by 2.9% on a yearly basis in July, easing from 3% in June. The annual core CPI, which excludes volatile food and energy prices, rose 3.2%, below the 3.3% previous, although matching expectations. Finally,  the monthly CPI and the core CPI MoM both rose 0.2%.

The US Dollar initially fell with the news, as it meant the Fed would likely deliver an interest rate cut in September. But after a few minutes, the market understood the news did not change much what it believed before it. As a result, the USD recovered some ground, but not enough to turn bullish. Ahead of Wall Street’s opening, markets are still struggling for direction, although risk appetite prevails.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it has already surpassed the aforementioned intraday high, extending gains and maintaining its positive momentum. The pair further advanced beyond bullish moving averages, with the 20 Simple Moving Average (SMA) accelerating higher above the 100 and 200 SMAs. Technical indicators, in the meantime, approach overbought readings with modest upward slopes without any other sign of upward exhaustion.

The near-term picture indicates resurgent buying interest. In the 4-hour chart, technical indicators keep advancing despite already developing within extreme readings. At the same time, the 20 SMA accelerated north above the longer ones. The current 1.1040 area offers resistance ahead of 1.1085, the next level to watch should EUR/USD maintain its strength.

Support levels: 1.0990 1.0950 1.0900

Resistance levels: 1.1045 1.1085 1.1120