EUR/USD Forecast: Optimistic bulls aiming to conquer 1.1200

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.1170

The United States Producer Price Index rose 2.4% YoY in June, below expectations.
Dominant risk appetite maintains the US Dollar in sell-off mode.
EUR/USD is extremely overbought in the near term, but it can still push higher.

The EUR/USD pair's unstoppable rally following the release of softer-than-anticipated United States (US) inflation-related figures continued throughout the first half of Thursday, with the pair peaking at 1.1189 during European trading hours. The US Dollar collapsed after the US Consumer Price Index rose by 0.2% MoM in June and 3% from a year earlier. Core annual inflation is still worrisome, as it printed at 5% YoY, yet headline figures convinced speculative interest the Federal Reserve (Fed) is closer to ending the tightening cycle.

Asian stocks posted substantial gains, although the momentum faded during European trading hours, with local indexes posting modest gains. Meanwhile, Wall Street's futures trade uneventfully around Wednesday's closing levels. Nevertheless, EUR/USD retains gains and stands a handful of pips below the aforementioned multi-week high.

The Euro clearly benefits from broad USD weakness, as Eurozone data released on Thursday disappointed. Industrial Production contracted 2.2% YoY in May, while it posted a modest 0.2% monthly advance. Across the pond, the US published the June Producer Price Index (PPI), which rose by a modest 0.1% MoM while adding 2.4% YoY. Wholesale inflation missed the market expectations and further indicated easing price pressures, pushing EUR/USD closer to the 1.1200 figure. Finally, Initial Jobless Claims for the week ended July 7 increased by 237K, beating the expected 250K.

EUR/USD short-term technical outlook

The EUR/USD pair daily chart shows that the Momentum indicator maintains its bullish slope well into positive territory, while the Relative Strength Index (RSI) indicator partially loses its upward strength within overbought levels. A due correction is not out of the table, but given the overall situation, it could be quite tepid. Meanwhile, the pair develops above all its moving averages, with the 20 Simple Moving Average (SMA) providing dynamic support at around 1.0950. All moving averages gain bullish traction, maintaining the risk skewed to the upside.

In the near term, and according to the 4-hour chart, the pair is extremely overbought yet with little signs of upward exhaustion. The Momentum indicator has lost its directional strength, but the RSI indicator extends its advance at around 81. Additionally, all moving averages head north far below the current level, reflecting bulls' dominance.

Support levels: 1.1150 1.1110 1.1065

Resistance levels: 1.1190 1.1240 1.1285

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.

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