EUR/USD prints fresh monthly high as US Dollar declines ahead of US inflation

• 
  EUR/USD
  rose
  to
  a
  fresh
  one-month
  high
  near
  1.0850
  amid
  weakness
  in
  the
  US
  Dollar
  ahead
  of
  the
  US
  inflation
  data
  for
  June.
• 
  The
  US
  Dollar
  declines
  as
  Fed’s
  Powell
  took
  away
  fears
  of
  inflation
  remaining
  persistent.
• 
  The
  Euro
  capitalizes
  on
  easing
  fears
  of
  a
  widening
  French
  financial
  crisis
  and
  diminishing
  ECB
  rate
  cut
  prospects.

EUR/USD
posts
a
fresh
one-month
high
at
around 
1.0850
in
Thursday’s
European
session.
The
major
currency
pair
strengthens
as
the
US
Dollar
(USD)
is
facing
selling
pressure
due
to
firm
expectations
that
the

Federal
Reserve
(Fed)
will
start
reducing
interest
rates
in
September.
The
US
Dollar
Index
(DXY),
which
tracks
the
Greenback’s
value
against
six
major
currencies,
edges
lower
to
near
104.90.

Market
speculation
for
Fed
rate
cuts
in
September
increased
as
comments
from
Fed
Chair
Jerome
Powell,
in
the
semi-annual
Congressional
testimony,
indicated
that
the
central
bank
has
made
quite
a
bit
of
progress
in
inflation
and
that
labor
market
strength
appears
to
have
eased.
Powell
refrained
from
announcing
a
victory
on
inflation
and
said
rate
cuts
would
be
appropriate
when
policymakers
gain
confidence
that
inflation
will
return
to
the
desired
rate
of
2%.

For
meaningful
guidance
on
the
interest
rate

outlook,
investors
await
the
US

Consumer
Price
Index
(CPI)
data
for
June,
which
will
be
published
at
12:30
GMT.
The
CPI
report
is
expected
to
show
that
the
core
inflation,
which
strips
off
volatile
food
and
energy
items,
grew
steadily
by
0.2%
and
3.4%
on
monthly
and
annual
basis,
respectively.
Annual
headline
inflation
is
estimated
to
have
decelerated
to
3.1%
from
May’s
reading
of
3.3%,
while
the
monthly
figure
is
expected
to
have
barely
grown
after
remaining
unchanged
in
May.

A
scenario
in
which
price
pressures
remain
sticky
or
hotter-than-expected
would
force
trades
to
pare
bets
of
rate
cuts
in
September.
On
the
contrary,
soft
numbers
will
be
favorable
for
lowering
borrowing
costs.
A
decline
in
the
US
inflation
would
also
increase
confidence
that
the
disinflation
process
has
resumed
and
high
price
pressures
recorded
in
the
first
quarter
were
mere
a
short-term
blip.

Daily
digest
market
movers:
EUR/USD
rises
as
uncertainty
over ECB’s
more rate
cuts
deepen

• EUR/USD
  moves
  higher
  to
  1.0850
  as
  concerns
  over
  the
  widening
  French
  financial
  crisis
  ease
  as
  Marine
  Le
  Pen’s
  far-right
  National
  Rally
  failed
  to
  maintain
  dominance
  over
  French
  President
  Emmanuel
  Macron’s
  centrist
  alliance
  and
  the
  left-wing
  coalition,
  also
  known
  as
  New
  Popular
  Front,
  led
  by
  Jean-Luc
  Melenchon.
• Economists
  were
  worried
  about
  the
  far
  right
  coming
  to
  power,
  which
  was
  expected
  to
  steer
  fiscal
  expansion.
  Currently,
  the
  centrist
  alliance
  is
  expected
  to
  join
  hands
  with
  the
  left
  wing
  to
  form
  a
  coalition
  government.
• Apart
  from
  diminishing
  fears
  of
  French
  financial
  crisis,
  easing
  expectations
  of
  subsequent
  rate
  cuts
  by
  the
  European
  Central
  Bank
  (ECB)
  have
  also
  brought
  stability
  to
  the
  Euro’s
  appeal.
• Traders
  pare
  bets
  favoring
  ECB’s
  back-to-back
  rate
  cuts
  as
  ECB
  policymakers
  hesitate
  to
  commit
  to
  a
  specific
  rate-cut
  path.
  ECB
  officials
  worry
  that
  an
  aggressive
  approach
  could
  revamp
  price
  pressures
  again.
  However,
  they
  are
  comfortable
  with
  expectations
  of
  more
  rate
  cuts
  this
  year.
• Meanwhile,
  revised
  estimates
  for
  the
  German
  Harmonized
  Index
  of
  Consumer
  Prices
  (HICP)
  confirmed
  that
  price
  pressures
  decelerated
  in
  June.
  Annual
  HICP
  grew
  at
  a
  slower
  pace
  of
  2.5%
  from
  May’s
  reading
  of
  2.8%.

Technical
Analysis:
EUR/USD
moves
toward
1.0900

EUR/USD
strengthens
after
delivering
a
breakout
of
the
Bullish
Flag
formation
in
a
4-hour
timeframe.
A
breakout
of
the
above-mentioned
chart
pattern
results
in
a
continuation
of
the
trend,
which
in
this
case
is
bullish.

The
20-period
Exponential
Moving
Average
(EMA)
near
1.0825
continues
to
support
the
Euro
bulls.

The
14-day
Relative
Strength
Index
(RSI)
establishes
into
the
bullish
range
of
60.00-80.00,
indicating
that
momentum
has
leaned
to
the
upside.

Going
forward,
the
psychological
figure
of
1.0900
will
be
a
key
target
for
the
Euro
bulls.
On
the
downside,
the
June
19
high
at
around
1.0750
will
be
a
major
support
zone.