EUR/USD trims gains post-US CPI, approaches 1.1250

After climbing as high as the proximity of 1.1290, EUR/USD lost some momentum and it has now receded to the 1.1260/55 band.

EUR/USD upside limited near 1.1290

Bulls were unable to push spot further north of the 1.1285/90 band on Thursday, sparking the ongoing correction lower soon afterwards.

In addition, EUR lost the grip after the ECB minutes showed the Governing Council is ready to cut interest rates, while Board member B.Coeure said earlier in the day the central bank is concerned about the protracted low inflation in the region.

Also weighing on the pair via the better mood in the buck, US inflation figures tracked by the Core CPI rose above estimates during June: 0.3% inter-month and 2.1% from a year earlier. The positive CPI prints gave extra oxygen to US yields, triggering a rebound in the spread differentials vs. their European peers.

What to look for around EUR

The shared currency is breathing some relief after the dovish tone from Fed’s Powell and the FOMC minutes. However, this is seen as a short-live boost against the backdrop of renewed and increasing speculations of another wave of monetary stimulus from the European Central Bank in the near term, via interest rate cuts (September?) and the resumption of the QE programme. Also weighing on the currency, the dovish stance from the ECB appears reinforced by the recent appointment of ex-IMF’s C.Lagarde to succeed M.Draghi. On the macro scenario, the slowdown in the region looks unremitting and it also reinforces the current accommodative attitude of the central bank.

EUR/USD levels to watch

At the moment, the pair is gaining 0.06% at 1.1257 and a break above 1.1286 (high Jul.11) would target 1.1325 (200-day SMA) en route to 1.1412 (high Jun.25). On the other hand, the next down barrier lines up at 1.1193 (monthly low Jul.9) followed by 1.1181 (low Jun.18) and finally 1.1106 (2019 low May 23).