EUR/USD Forecast: Euro could push higher on a soft US inflation reading
- EUR/USD continues to edge higher after posting small gains on Wednesday.
- The US economic docket will feature Consumer Price Index data for June.
- Buyers could remain interested if the pair confirms 1.0840-1.0850 as support.
Following a quiet European session on Wednesday, the improving risk mood in the American trading hours made it difficult for the US Dollar (USD) to find demand and allowed EUR/USD to end the day in positive territory. The USD stays on the back foot early Thursday, helping the pair continue to stretch higher.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | -0.50% | 0.48% | -0.12% | -0.14% | 0.77% | 0.23% | |
| EUR | 0.11% | -0.18% | 0.95% | 0.31% | 0.13% | 1.22% | 0.68% | |
| GBP | 0.50% | 0.18% | 1.08% | 0.51% | 0.31% | 1.41% | 0.86% | |
| JPY | -0.48% | -0.95% | -1.08% | -0.61% | -0.61% | 0.44% | -0.21% | |
| CAD | 0.12% | -0.31% | -0.51% | 0.61% | -0.06% | 0.90% | 0.36% | |
| AUD | 0.14% | -0.13% | -0.31% | 0.61% | 0.06% | 1.09% | 0.55% | |
| NZD | -0.77% | -1.22% | -1.41% | -0.44% | -0.90% | -1.09% | -0.54% | |
| CHF | -0.23% | -0.68% | -0.86% | 0.21% | -0.36% | -0.55% | 0.54% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The US Bureau of Labor Statistics (BLS) will release the Consumer Price Index (CPI) data for June later in the day. Investors expect the monthly core CPI, which excludes volatile food and energy prices, to rise 0.2% to match May's increase.
The CME FedWatch Tool shows that markets see a nearly 30% chance of the Federal Reserve (Fed) leaving the policy rate unchanged in September. A monthly core CPI reading of 0.1% or lower could feed into expectations for a September rate cut and cause the USD to weaken against its rivals. On the other hand, a positive surprise in this data could support the currency and cap EUR/USD's upside.
The US economic docket will also feature the weekly Initial Jobless Claims data. In case CPI figures come in line with analysts' estimate, this data could drive the USD's valuation. If the number of first-time applications for unemployment benefits rise close to 250,000, the USD could come under renewed selling pressure, while a reading at or below 220,000 could have the opposite effect.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rose slightly above 70. Although this development points to overbought conditions for EUR/USD in the near term, investors could ignore it when reacting to the US inflation data.
On the upside, 1.0900 (psychological level, static level) could be seen as first resistance before 1.0915 (June 4 high). In case the pair fails to stabilize above 1.0840-1.0850 (Fibonacci 23.6% retracement of the latest uptrend, static level), buyers could get discouraged. In this scenario, the 100-day and the 200-day Simple Moving Averages (SMA) form strong support at 1.0800 before the 200-period SMA on the 4-hour chart at 1.0780.
Economic Indicator
Consumer Price Index (MoM)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM figure compares the prices of goods in the reference month to the previous month.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Thu Jul 11, 2024 12:30
Frequency: Monthly
Consensus: 0.1%
Previous: 0%
Source: US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
