Forex overview. EUR/USD Nears Make-or-Break Zone Ahead of Critical CPI Report – ForexNews.PRO
The EUR/USD pair is undergoing a corrective phase, retreating from its peak levels observed since September 2021. This pullback is occurring as the US dollar finds strength from the Federal Reserve’s persistent hawkish stance, particularly as investors await critical CPI figures. The market is keenly focused on these inflation reports to assess the probability of a rate reduction by the Fed in September.
Meanwhile, inflation within the Eurozone is holding steady, affording the European Central Bank greater flexibility to pursue accommodative monetary policies.
The recent release of Fed minutes last Wednesday indicated that certain policymakers are inclined to maintain current interest rates through year-end, given concerns that inflation may persist above desired levels.
This week’s CPI data releases from both the US and Eurozone are pivotal events to monitor.
In other news, President Trump has expressed intentions to increase arms shipments to Ukraine and has threatened new tariffs, potentially reaching 100%, should Russia fail to reach an agreement.
The Fed’s cautious approach to interest rate cuts stems from inflation remaining slightly above its target, coupled with the potential for further increases later in the year, particularly amidst ongoing tariff disputes.
Despite pressure from President Trump to lower rates to as low as 1%, Fed Chair Jerome Powell and his team are maintaining a steady course. Their confidence is bolstered by a stable labor market and continued economic growth, which alleviates concerns of an impending recession.
Market expectations for a 25-basis point rate cut remain, but with a diminished likelihood of less than 60%, it’s far from a certainty. The upcoming CPI data will be crucial in determining the feasibility of a September rate cut.
This week places inflation data at the forefront, with key US consumer inflation figures due today. Both headline and core inflation are projected to show year-over-year increases.
Conversely, Eurozone inflation appears stable and within target, giving the ECB leeway for further rate cuts.
Technically, the EUR/USD pair’s correction is forming a bearish channel, which could potentially widen. However, downside movement may be limited as the price approaches a significant support level around 1.1630.
A breach of the 1.1630 support could lead to further declines toward the 1.1450 target. Conversely, if this proves to be merely a correction, a rebound is anticipated. A break above the channel’s upper boundary would signal a return to an upward trajectory.
Stronger-than-expected data would reinforce the Fed’s rationale for holding off on rate cuts. Following Wednesday’s PPI data, attention will shift to Thursday’s Eurozone CPI release.
