For four consecutive trading sessions, the price of the EUR/USD currency pair received a strong bullish momentum. This was a result of which it moved towards the resistance level 1.1036 at the time of writing the analysis, its highest in two months. This rebound is on an important date today, as US inflation numbers will be announced, which will have a strong reaction on the future of raising interest rates from the US Federal Reserve, and thus will determine the fate of the current upward path for the currency pair.
The US stock market ended higher ahead of a report that is expected to show a slowdown in US inflation, which will help shape expectations for the next steps of the Federal Reserve. Forecasters polled by Bloomberg expect the annual rate of increase in core inflation to ease to 5 percent, according to the median estimate. But the slowdown probably won't be enough to prevent further policy tightening, as Fed officials are widely expected to resume rate hikes later this month.
After rising to a four-decade high in June 2022, the CPI has steadily declined in the face of the Fed's monetary policy onslaught. The slowdown has provided support for this year's stock market rally, and the bulls have strong precedent for their enthusiasm. The official US inflation reading is due at 13:30 GMT and the inflation forecast of 3.1% falls in the middle of market expectations, which range from 2.9% to 3.4%.
However, the market is still looking for the Federal Reserve to raise US interest rates at least on one more occasion in July, with another hike likely in September. Any further gains will depend on the outcome of Wednesday's reading, which makes it significant for financial markets and the US dollar. It is possible that the lack of fulfillment of market expectations will push the markets to bet on the possibility of only one rise, which will affect yields and the dollar as bets on a decline in movement in September.
EUR/USD forecast today:
- The stability of the price of the EUR/USD currency pair above the psychological resistance 1.1000 will be important for more bulls controlling the trend.
- The chance of testing higher peaks may increase, especially if the US inflation figures came today below all expectations.
- In general, the bulls' closest targets will be the resistance levels at 1.1075, 1.1120, and 1.1200, respectively.
On the other hand, according to the performance on the daily chart below, the move towards the support levels 1.0940 and 1.0885 will be important for the bears to control the trend again.
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