EUR/USD Forecast: Easing US inflation provides a welcomed boost

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0813

The US Consumer Price Index rose by 0.1% MoM in May, below the 0.2% expected.
Odds for a Federal Reserve pause in monetary tightening increased after inflation figures.
EUR/USD struggles to extend gains but bulls will likely retain control.

The EUR/USD pair peaked at 1.0810 during European trading hours, as the US Dollar traded with a soft tone ahead of the release of the United States (US) Consumer Price Index (CPI). The pair benefited from better-than-anticipated German data and hopes US inflation had continued to soften in May.

Regarding German macroeconomic figures, the country confirmed the May Harmonized Index of Consumer Prices (HICP) rate at 6.3% YoY. Additionally, the ZEW Survey showed that Economic Sentiment improved in the country to -8.5 in June, although the Eurozone indicator fell by more than anticipated to -10. On a negative note, German’s assessment of the current situation collapsed from the previous -34.8 to -56.5.

At the same time, Asian shares advanced, backing the high-yielding Euro, while US Treasury yields came under pressure undermining demand for the USD.

The EUR/USD pair extended its advance with the release of US CPI figures. According to the Bureau of Labor Statistics, the inflation rate was 0.1% MoM in May and 4% from a year earlier, both slightly below the market’s expectations. The core annual CPI rose by 5.3%, as expected, easing from the previous 5.5%.

The figures fueled speculation the Federal Reserve (Fed) will refrain from hiking rates when it concludes its meeting this Wednesday, with the CME FedWatch Tool showing odds for a no-change at 79.2%. Additionally, the chance of a 25 bps rate hike in July remains above 50%. Overall, inflation figures were encouraging but insufficient to confirm the end of the monetary tightening cycle.

EUR/USD short-term technical outlook

The EUR/USD pair holds on to gains and trades at around 1.0810, with the risk skewing to the upside. The daily chart shows that the pair met buyers around a directionless 20 Simple Moving Average (SMA) but struggles to advance beyond an also flat 100 SMA. Technical indicators, however, extend their advances into positive territory, reflecting increased buying interest.

The near-term picture also favors a bullish continuation, as the pair has steadily bounced from a bullish 20 SMA, which extends its advance above a directionless 100 SMA. The 200 SMA, in the meantime, provides dynamic resistance at around 1.0840. Finally, technical indicators remain well in positive territory, although their upward strength is uneven. The Relative Strength Index (RSI) is partially losing momentum as it approaches overbought readings, but other than that, there are no signs of bullish exhaustion.

Support levels: 1.0785 1.0745 1.0710

Resistance levels: 1.0850 1.0890 1.0930

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

AUD/USD keeps the red near 0.6950 after weak Aussie jobs data

AUD/USD holds losses near 0.6950 on disappointing Australian jobs data, extending the previous day's retracement slide from the monthly high and hitting a fresh weekly low during Thursday’s Asian session. Meanwhile, declining US bond yields drag the US Dollar away from the April 2025 high, touched after Wednesday's hot US CPI, helping limit losses for the currency pair.

USD/JPY slides back below 158.00 as USD reverses post-CPI gains

USD/JPY extends the previous day's pullback from a three-week high, attracting follow-through selling and sliding below 158.00 during Thursday's Asian session. Traders remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen. The US Dollar, meanwhile, reverses Wednesday's hot CPI-led gains to April 2025 highs as US bond yields retreat on China bond-buying talk, further pressuring the pair.

Gold sticks to gains below $4,150 on weak USD; bulls seem hesitant amid Fed hike bets

Gold clings to modest intraday gains through the early European session amid a broadly weaker US Dollar, snapping a three-day losing streak to a one-week low set on Wednesday. The initial aggressive market reaction to hot US consumer inflation figures faded quickly amid expectations that the Fed may not rush to raise interest rates immediately. This led to a further decline in US bond yields, prompting some follow-through USD profit-taking and supporting the non-yielding bullion.

Bitcoin, XRP analyst sentiment jumps as Solana bulls hit 91%: CryptoQuant

Analyst sentiment on Bitcoin, Ethereum, Solana, BNB and XRP has flipped bullish since July, as the top five cryptocurrencies recovered faster and more strongly than during the 2022-2023 market phase, according to CryptoQuant.

Budget preview: Is Healey impressing the bond market?

There is less than 2 weeks to go before the Chancellor delivers his first budget. Unusually for the UK, the economic and financial backdrop to this budget is upbeat. UK bonds have been rallying, the FTSE 100 is the top performing major stock index this week, and the Pound is also stabilising versus the Dollar.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?