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

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).