EUR/USD Forecast: The hunt for 1.1000 has begun

• 
  EUR/USD
  consolidates
  its
  bullish
  appetite
  around
  1.0900.
• 
  The
  US
  Dollar
  melted
  on
  poor
  US
  CPI
  prints.
• 
  US
  Producer
  Prices
  should
  keep
  the
  focus
  on
  the
  inflation
  issue.

The
US
Dollar
(USD)
accelerated
its
downward
trend
big
time
on
Thursday,
dragging
the
USD
Index
(DXY)
to
multi-week
lows
near
the
104.00
neighbourhood
in
the
wake
of
the
publication
of
lower-than-estimated
US
inflation
figures
gauged
by
the
CPI.

The
steep
decline
in
the
Greenback
motivated
EUR/USD
to
revisit
the
1.0900
hurdle
for
the
first
time
since
early
June,
always
against
the
backdrop
of
further
repricing
of
the
start
of
the
easing
cycle
by
the
Federal
Reserve
(Fed)
in
September.

Following
the
US
CPI
data,
the
CME
Group’s
FedWatch
Tool
suggests
a
nearly
93%
chance
of
interest
rate
cuts
in
September,
increasing
to
around
99%
by
December.

But
then
again,
that’s
the
market
speaking.

Against
that
backdrop,
it
is
worth
remembering
that
Chief
Jerome
Powell
indicated
he
was
not
yet
convinced
that
inflation
was
sustainably
decreasing
to
2%,
though
he
showed
“some
confidence”
it
was
trending
in
that
direction.
On
Thursday,

Federal
Reserve
Bank
of
St.
Louis
President
Alberto
Musalem
argued
that
the
consumer
price
data
released
earlier
in
the
day
is
moving
in
the
right
direction.
Musalem
remarked
that
recent
inflation
data
“has
slowed
and
is
consistent”
with
more
price-sensitive
consumers.
He
also
expressed
his
belief
that
monetary
policy
is
currently
in
the
right
place
and
mentioned
that
he
is
monitoring
the
data
to
see
if
inflation
continues
to
moderate
back
to
the
2%
target.

Her
colleague
Mary
Daly,
President
of
the
San
Francisco
Federal
Reserve
Bank,
remarked
that
recent
cooler
inflation
readings
are
a
“relief,”
and
she
anticipates
further
easing
in
both
price
pressures
and
the
labour
market,
which
would
justify
interest
rate
cuts.
She
noted
that
while
inflation
is
likely
to
cool
further,
the
progress
may
be
“bumpy.”
Daly
indicated
that
the
economy
appears
to
be
moving
towards
a
scenario
where
one
or
two
interest
rate
cuts
this
year,
as
projected
in
the
June
Fed
policymaker
forecasts,
“would
be
the
appropriate
path.”

In
the
meantime,
the
macroeconomic
landscape
remained
stable
on
both
sides
of
the
Atlantic.
The
European
Central
Bank
(ECB)
is
considering
further
rate
cuts
beyond
the
summer,
with
markets
anticipating
two
additional
cuts
by
year-end,
while
debate
continues
among
investors
about
whether
the
Fed
will
implement
one
or
two
(or
three?)
rate
cuts
this
year,
despite
the
Fed’s
current
projection
of
a
single
cut,
likely
in
December.

The
ECB’s
rate
cut
in
June,
along
with
the
Fed’s
decision
to
maintain
rates,
has
widened
the
policy
divergence
between
the
two
central
banks,
potentially
leading
to
further
weakening
of
EUR/USD
in
the
short
term.

However,
economic
recovery
prospects
in
the

Eurozone,
combined
with
signs
of
cooling
in
key
US
economic

indicators,
may
mitigate
this
disparity
and
occasionally
support
the
pair
in
the
near
future.

Looking
ahead,
market
participants
should
closely
monitor
the
release
of
further
US
inflation
data
gauged
by
Producer
Prices
on
Friday
as
well
as
the
advanced
Michigan
Consumer
Sentiment
print.

EUR/USD
daily
chart

EUR/USD
short-term
technical
outlook

EUR/USD
is
expected
to
meet
the
next
up-barrier
at
the
July
peak
of
1.0900
(July
11),
followed
by
the
June
peak
of
1.0916
(June
4).
If
the
pair
rises
over
this
level,
it
may
bring
the
March
peak
of
1.0981
(March
8)
back
into
focus,
followed
by
the
psychological
1.1000
barrier.

If
bears
get
the
upper
hand,
spot
might
touch
the
200-day
SMA
at
1.0802
before
sliding
to
a
low
of
1.0666
on
June
26.
From
here,
the
May
low
of
1.0649
(May
1)
leads
to
the
2024
bottom
of
1.0601
(April
16).

Looking
at
the
larger
picture,
it
looks
that
further
gains
are
on
the
way
if
the
key
200-day
SMA
is
routinely
surpassed.

So
far,
the
4-hour
chart
indicates
a
modest
improvement
in
the
upside
momentum.
Initial
resistance
comes
at
1.0900
ahead
of
1.0916.
On
the
flip
side,
the
55-SMA
at
1.0798
comes
first
ahead
of
the
200-SMA
at
1.0784
and
ultimately
1.0709.
The
Relative
Strength
Index
(RSI)
has
dropped
below
65.