EUR/USD Forecast: Bearish Dollar's momentum still strong
- The EUR/USD pair continues to rise amid weakness in the Dollar.
- More evidence of slowing US inflation is weighing on the USD.
- The pair is still searching for a new level of support.
The EUR/USD rose for the sixth consecutive day, not slowing down, boosted by another sell-off of the US Dollar. US inflation data offered more evidence of slowing down. The negative momentum of the Dollar remains strong and could lead to further gains; however, the extent of the rally points to some consolidation or a modest correction.
The European Central Bank(ECB) released the minutes of its latest meeting. 'The view was held that the Governing Council could consider increasing interest rates beyond July, if necessary,' the document stated. It was in line with recent comments from President Lagarde. A hike in July is priced in. Data released on Thursday showed that Industrial Production in the Eurozone expanded 0.2% in May, below the market consensus of 0.3%. On Friday, the European Commission will release economic growth forecasts and trade balance data.
The driver in the market continues to be the US Dollar which is not finding support in its fall. The DXY dropped below 100.00 for the first time in a year. US and Eurozone yields continue to decline as markets see the end of the hiking cycle nearing.
Like the US Consumer Price Index, the Producer Price Index offered evidence of inflation slowing down further, triggering more losses for the Dollar. The annual PPI rate dropped to 0.1% from 0.9%, and the Core rate fell to 2.4% from 2.8%. On Friday, Consumer Confidence data is due.
EUR/USD short-term technical outlook
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The EUR/USD rose further, reaching fresh highs. It broke above 1.1200 and remains near the highs at 1.1225, with the momentum still strong despite accumulating gains of 400 pips from a week ago. The extent of the rally increases the odds of some consolidation ahead; however, the negative tone across the Dollar remains too strong.
On the 4-hour chart, technical indicators are deep in overbought territory, but not showing a potential change in the upward direction, suggesting that it could continue to move higher. The next resistance area emerges around 1.1250, which should limit the upside. It is followed by 1.1270 and 1.1300. On the flip side, support level are located at 1.1195, 1.1150 and the important area of 1.1100.
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Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
