EUR/USD Forecast: US Dollar falls as US inflation eases by more than anticipated

EUR/USD Current price: 1.0816

• The US Consumer Price Index rose by less than expected in May.
• Financial markets turned optimistic ahead of the Federal Reserve’s announcement.
• EUR/USD turned bullish in the near term, faces immediate resistance at around 1.0840.

The EUR/USD pair trades well above the 1.0800 threshold, filling the weekly opening gap and bullish following the release of United States (US) data. The Bureau of Labor Statistics (BLS) reported that the  Consumer Price Index (CPI) rose 3.3% YoY in May after hitting 3.4% in April. The CPI remained stable on a monthly basis, easing from the previous 0.3%. The core readings, which exclude volatile food and energy prices, were also below forecast and eased from the April readings.

Easing price pressures in the world’s largest economy prompted optimism on financial boards. Stocks turned firmly north, pushing high-yielding currencies higher, while the US Dollar entered a sell-off spiral.

The rally stalled as speculative interest faces another challenge in a few hours. The Federal Reserve (Fed) will announce its decision on monetary policy in a few hours. The Fed is widely expected to keep rates on hold, with the focus on whether policymakers maintain the hawkish stance from the previous meeting or not.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart shows EUR/USD recovered above directionless 100 and 200 Simple Moving Averages (SMAs), while a bearish 20 SMA provides dynamic resistance at around 1.0840. At the same time, technical indicators picked up bullish strength but are currently struggling to overcome their midlines, which is not enough to anticipate another leg north.

According to the 4-hour chart, EUR/USD is bullish in the near term. Technical indicators aim north vertically, having surpassed their midlines. At the same time, the pair overcame the 20 and 200 SMAs but faces near-term resistance from a mildly bearish 100 SMA at around 1.0840. Overall, it seems investors will hold additional fire until after the Fed.

Support levels: 1.0790 1.0750 1.0710

Resistance levels: 1.0840 1.0885 1.0920