EUR/USD Surpasses 1.1150 Amidst Prolonged US Dollar Decline

Fundamental Overview

In the European session, the EUR/USD is making significant strides towards 1.1200, surging to new highs in 2023. This impressive performance is attributed to the continuous weakening of the US dollar across the board, despite lower US CPI figures. The dovish views expressed by the Federal Reserve further contribute to the decline of the US dollar. Traders are also closely monitoring US PPI statistics and the release of ECB Minutes.

EUR/USD Uptrend Continues, Reaches Highest Point Since March 2022

The EUR/USD exhibited strength on Wednesday, recording substantial gains. Continuing its upward momentum, the pair reached its highest point since March 2022, surpassing the 1.1150 mark on Thursday morning in Europe. However, the recent surge has pushed the pair into overbought territory, prompting cautiousness among buyers who may wait for a technical pullback before making further bets on gains.

Weak US Inflation Weighs on USD, Boosts EUR/USD

The USD faced significant pressure as a result of weak US inflation statistics, bolstering the remarkable rise of EUR/USD. While the Consumer Price Index (CPI) witnessed a 3% annual increase in June following a 4% rise in May, both the monthly CPI and Core CPI only experienced a 0.2% gain. Consequently, investors now perceive a limited likelihood of the US Federal Reserve raising the policy rate twice more this year, creating challenges for the demand of the USD.

Impact of Fed Policymakers on USD Performance

Despite the USD’s struggle to gain traction due to the aforementioned remarks, the currency may be able to mitigate its losses if Fed policymakers make efforts to convince the markets that two additional rate hikes remain the most likely outcome, despite the recent slowdown in inflation. With the Fed’s blackout period commencing on Saturday, policymakers have until Thursday and Friday to influence market expectations.

PPI Data and USD Outlook

The second half of the day’s US economic schedule will feature the presentation of the Producer Price Index (PPI) data for June. Expectations point to a 0.2% monthly increase following a 0.3% decline in May. A disappointing reading is likely to maintain the weakness of the USD, while a stronger-than-anticipated print might trigger a currency recovery, albeit potentially short-term.

EUR/USD Technical Analysis Daily Chart

Technical Overview

• EUR/USD is currently trading within an upward channel.
• The pair is positioned above all Simple Moving Averages (SMA).
• The Relative Strength Index (RSI) indicates bullishness, while the Stochastic oscillator suggests an upward trend.
• Resistance level: 1.1173
• Immediate support level: 1.1158

How to Trade EUR/USD

Following a rise, the price of EUR/USD experienced a slight retracement before resuming its ascent to reach new highs. At present, the pair has surpassed its previous day’s high and is trading within a resistance area. A breakthrough of this area could lead to further gains.

Trade Suggestion: BUY at 1.1173, TAKE PROFIT at 1.1190, SL at 1.1159

Conclusion

EUR/USD continues its upward trajectory, surpassing the 1.1150 level amidst a prolonged decline of the US dollar. Factors such as weak US inflation, dovish Fed views, and upcoming PPI data have influenced the pair’s performance. Technical analysis suggests a bullish outlook for EUR/USD, but caution is advised due to the potential for a technical pullback. Traders can consider the provided trade suggestion as a potential approach in the current market conditions.

FAQs

Q: What factors are driving the rise of EUR/USD?

A: The persistent decline of the US dollar, weak US inflation figures, and dovish views from the Federal Reserve have all contributed to the upward movement of EUR/USD.

Q: Is there a possibility of a technical pullback for EUR/USD?

A: Yes, the recent surge in the pair has pushed it into overbought territory, indicating that buyers may exercise caution and wait for a technical pullback before expecting further gains.

Q: How are Fed policymakers impacting the performance of the USD?

A: Fed policymakers have the opportunity to influence market expectations regarding future rate hikes. If they can convince the markets that two more rate increases are likely, despite the recent slowdown in inflation, it could help minimize losses for the USD.

Q: What is the significance of the upcoming PPI data release?

A: The Producer Price Index (PPI) data for June will provide insights into inflationary pressures in the US. A stronger-than-expected print could trigger a short-term currency recovery, while a poor reading might maintain USD weakness.

Q: What technical indicators suggest a bullish outlook for EUR/USD?

A: EUR/USD is currently trading within an upward channel, positioned above all Simple Moving Averages (SMA). The Relative Strength Index (RSI) indicates bullishness and the Stochastic oscillator suggests an upward trend.

Q: How can traders approach EUR/USD in the current market conditions?

A: Traders may consider buying EUR/USD if the pair breaks through the resistance area. A trade suggestion is to BUY at 1.1173, with a TAKE PROFIT at 1.1190 and a Stop Loss (SL) at 1.1159.