• EUR/USD reversed the recent downtrend and regained 1.0800.
  • The US Dollar came under pressure after the US CPI surprised to the downside.
  • The Federal Reserve kept its rates unchanged, as broadly expected.

The US Dollar (USD) continued its strong retracement on Wednesday, this time on the back of disheartening US inflation figures tracked by the CPI in May, lending fresh legs to EUR/USD beyond the key 1.0800 barrier, or three-day highs.

It was all about the US CPI and the FOMC event on Wednesday, as EUR/USD seems to have temporarily set aside fresh political concerns on the old continent, particularly those reignited following the European parliamentary elections over the weekend.

Meanwhile, ECB Vice President de Guindos argued on Wednesday that the bank should proceed "very slowly" with reducing interest rates due to considerable uncertainty surrounding the inflation outlook.

In what was the salient event of the day, the Federal Reserve maintained interest rates steady and suggested that rate cuts may not begin until December. They projected a single quarter-percentage-point reduction for the year, reflecting rising inflation estimates. The end-of-year inflation projection has been revised to 2.6%, up from the previous 2.4%. Discussions suggest that the neutral interest rate may be higher than previously estimated, placing it more than a quarter of a percentage point above its level at the end of 2023.

Furthermore, Chair Powell argued at his press conference that a single quarter-percentage-point rate cut would not significantly impact the US economy, emphasizing that the overall policy trajectory is more crucial.

The CME Group's FedWatch Tool now indicates nearly a 95% probability of lower interest rates by the December 18 gathering.

In the short term, the ECB's recent rate cut vs. the Fed’s on-hold stance has widened the policy gap between both central banks, potentially exposing EUR/USD to further weakness. However, in the longer term, the emerging economic recovery in the Eurozone, combined with perceived slowdowns in the US economy, should help mitigate this disparity, offering some support to the pair.

In the meantime, US inflation is expected to remain in the limelight ahead of the release of Producer Prices on June 13.

EUR/USD daily chart

EUR/USD short-term technical outlook

If the bearish tone continues, EUR/USD may first hit the June low of 1.0719 (June 11), followed by the May low of 1.0649 (May 1) and the 2024 low of 1.0601 (April 16).

If bulls reclaim the lead, there is an immediate up-barrier at the weekly high of 1.0852 (June 12) ahead of the June top of 1.0916 (June 4) and the March peak of 1.0981 (March 8). Further north, the weekly high of 1.0998 (January 11) appears before the important 1.1000 threshold.

So far, the 4-hour chart shows an important bounce. That said, initial hurdle comes at 1.0852 prior to 1.0916 and 1.0942. Southwards, there is immediate contention at 1.0719 ahead of 1.0649 and 1.0516. The relative strength index (RSI) retreated below 55.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD corrects sharply toward 1.0950 ahead of US NFP, Powell

EUR/USD corrects sharply toward 1.0950 ahead of US NFP, Powell

EUR/USD is extending its correction toward 1.0950 in the European session on Friday. The US Dollar has come up for air after the trade war and recession fears-led sell-off, weighing on the pair. Traders look to the US NFP report and Fed Chair Powell's speech for fresh directives.  

EUR/USD News
GBP/USD remains heavy near 1.3000, US NFP data awaited

GBP/USD remains heavy near 1.3000, US NFP data awaited

GBP/USD is battling 1.3000, under heavy selling pressure in European trading on Friday. Traders resort to profit-taking on their US Dollar short positiions, re-adjusting ahead of the critical US Nonfarm Payrolls data and Fed Chair Powell speech. 

GBP/USD News
Gold price sticks to negative bias around $3,100; bears seem non-committed ahead of US NFP report

Gold price sticks to negative bias around $3,100; bears seem non-committed ahead of US NFP report

Gold price meets with a fresh supply on Friday, though the downside potential seems limited. Trump’s tariffs-inspired risk-off mood might continue to act as a tailwind for the precious metal. Fed rate cut bets weigh on the USD and also contribute to limiting losses for the XAU/USD pair.

Gold News
Nonfarm Payrolls forecast: US jobs growth set to slow in March amid growing worries over US tariffs

Nonfarm Payrolls forecast: US jobs growth set to slow in March amid growing worries over US tariffs

Nonfarm Payrolls are forecast to rise by 135K in March, following a 151K gain reported in February. The United States Bureau of Labor Statistics will release the jobs data on Friday at 12:30 GMT. US labor data could impact the Fed’s interest rate path, potentially affecting the US Dollar's price action.

Read more
Trump’s “Liberation Day” tariffs on the way

Trump’s “Liberation Day” tariffs on the way

United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs. 

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Majors

Cryptocurrencies

Signatures

Best Brokers of 2025