EUR/USD rises on the EU migration deal, focus on inflation differential

The EUR/USD jumped above 1.16 on the EU migration deal.
Further gains likely if the inflation differential widens in the EUR-positive manner.
The Eurozone preliminary CPI reading for June is due at 09:00 GMT.
US core personal consumption expenditure is scheduled for release at 12:30 GMT.

Omkar Godbole FXStreet Contributor

The EUR/USD pair jumped 100 pips to a high of 1.1666 in Asia as the European Union (EU) leaders reached an agreement on migration.

Had the EU summit failed to reach consensus, the EU's unity would have likely shattered. More importantly, the failure to reach a deal would have brought down German Chancellor Angela Merkel's coalition government.

Hence, the EUR spiked on the EU migration deal. The currency pair will likely keep the gains as the European and US markets are expected to trade risk-on. However, inflation numbers could play a spoilsport.

Focus on inflation differential

The cost of living in the Eurozone as represented by the consumer price index (CPI) is seen rising 2 percent year-on-year in June vs 1.9 percent in May. Meanwhile, core CPI growth is seen cooling to 1.0 percent from 1.1 percent. A weaker-than-expected inflation figure could hurt the common currency.

Meanwhile, the Fed's preferred measure of inflation - the Core Personal Consumption Expenditure Index (PCE) is seen rising 1.9 percent year-on-year in May. A better-than-expected figure will likely bolster the already bullish setup in the US dollar.

EUR/USD Technical Levels

Resistance: 1.1698 (4-hour 200MA), 1.1700 (round number), 1.1721 (June 25 high resistance on 4-hour chart).

Support: 1.1613 (4-hour 50MA), 1.1527 (previous day's low), 1.1508 (June 21 low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M		Overbought	High
1H	Bearish	Overbought	Expanding
4H	Bearish	Neutral	Expanding
1D	Bullish	Neutral	High
1W	Strongly Bearish	Oversold	Expanding
Updated Jun 29, 04:00 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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