EUR/USD Forecast: Bullish Momentum Builds as US CPI Data Supports Limited Interest Rate Hike Options

The EUR/USD pair is steadily advancing with strong momentum, driven by soft United States Consumer Price

Arslan Butt•Thursday, July 13, 2023•2 min read

The EUR/USD pair is steadily advancing with strong momentum, driven by soft United States Consumer Price Index (CPI) data, which suggests limited options for the Federal Reserve (Fed) to raise interest rates by year-end.

As a result, the major currency pair has climbed to nearly 1.1150, while the US Dollar Index (DXY) faces downward pressure and market sentiment remains positive.In June, both monthly headline and core inflation in the US showed moderate growth of 0.2%, with annualized figures experiencing a significant decline due to lower prices of used cars. Consequently, the US Dollar Index (DXY) has experienced a sharp decline to around 101.40, and this downward trend is expected to continue.

Meanwhile, the European Central Bank (ECB) is anticipated to implement further interest rate hikes in an effort to manage persistent inflation. ECB President Christine Lagarde has made it clear that additional interest rate adjustments are necessary.From a technical analysis standpoint, the EUR/USD pair is poised to break out of a slightly ascending channel on the daily scale. The upper boundary of this chart pattern is defined by the February 03 high at 1.1033, while the lower boundary is represented by the March 15 low at 1.0516. Notably, potential resistance is observed at the January 14, 2022 high of 1.1483.

The upward-sloping 20-period Exponential Moving Average (EMA) at 1.0947 indicates a bullish short-term trend, further supporting the upward momentum.Furthermore, the Relative Strength Index (RSI) (14) has entered the bullish range of 60.00-80.00, signaling the activation of upside momentum.To extend the upward movement, a decisive breakthrough above the psychological resistance level of 1.1200 would expose the asset to the March 01, 2022 high at 1.1233, followed by the February 25, 2022 high at 1.1271.

In an alternative scenario, if the pair moves downward below the February 03 high at 1.1033, it could test the psychological support level of 1.1000. Further decline below this level would bring the major currency pair towards the June 15 high at 1.0953.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.