EUR/USD under pressure all eyes on US inflation data

RoboForex Analysis Department RoboForex

The EUR/USD pair dipped to 1.1620 on Tuesday following sharp swings in the previous session. Investors are bracing for the release of US inflation data, which could reshape expectations for the Federal Reserve’s interest rate policy.

The July CPI is forecast to rise by 0.2% month-on-month, down from 0.3% in June, while the annual rate is expected to climb for a third consecutive month to 2.8%. The core index is expected to remain steady at 0.3% month-on-month.

Despite persistent inflationary pressures, markets are pricing in a near-90% probability of a Fed rate cut in September.

On the trade front, President Donald Trump has extended the truce with China by another 90 days to allow further negotiations. Another key focus is Trump’s upcoming meeting with the Russian president on Friday, where discussions are expected to focus on a ceasefire agreement.

Aside from the US inflation figures, traders are awaiting the ZEW Eurozone Economic Sentiment Index for August, which is projected to rise to 30.0 points, up from 28.1 previously. Later in the day, Fed officials are scheduled to speak, potentially offering further clues on monetary policy.

Technical analysis: EUR/USD

H4 Chart:

The EUR/USD is currently consolidating near the top of its corrective phase. A break below 1.1611 could trigger a downward wave, targeting 1.1520, with potential for an extended decline towards 1.1343. This bearish scenario is supported by the MACD indicator, where the signal line remains above zero but is pointing sharply downwards.

H1 Chart:

The pair has completed a downward impulse to 1.1611, followed by a rebound to 1.1679, effectively setting a consolidation range. Today, traders should watch for a downside breakout, potentially initiating a fifth downward wave towards 1.1520. A brief retest of 1.1611 (from below) could be followed by further declines to 1.1444, with an eventual target of 1.1343. The Stochastic oscillator reinforces this outlook, with its signal line below 80 and trending downwards towards 20.

Conclusion

With US inflation data in focus, the EUR/USD remains vulnerable to further downside. A break below 1.1611 could accelerate selling pressure, while any surprises in the CPI figures may prompt a reassessment of Fed rate expectations.

Author

RoboForex Analysis Department

RoboForex

RoboForex Analysis Department provides timely market insights, expert technical analysis, and actionable forecasts across forex, commodities, indices, and equities.

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