- The US CPI report showed the first drop in inflation since 2020.
- In June, inflation fell by 0.1% when economists expected it to rise by 0.1%.
- The ECB could cut borrowing costs again in September and December.
EUR/USD price analysis shows strong bullish momentum as dollar falls amid rising expectations for September Fed tapering. Meanwhile, economists expect the European Central Bank to cut rates two more times this year.
–Are you interested in learning more about Bitcoin price prediction? Check out our detailed guide-
It was a dark day for the dollar on Thursday when the US CPI report showed the first drop in inflation since 2020. In June, inflation fell 0.1% when economists expected it to rise 0.1%. At the same time, the annual figure increased by 3.0%, less than expected.
This was a welcome surprise for the Fed, which has remained cautious despite the recent decline. Powell insisted that policymakers need more evidence that inflation will reach the 2% target. Thursday’s report opens the door for a rate cut. As a result, the probability of a reduction in September increased from 73% to 93%.
Moreover, if policymakers assume a more dovish view, the dollar will fall more. Additionally, a dovish Fed would allow other major central banks such as the BoC and ECB to continue cutting interest rates.
A Reuters poll on Thursday suggested the ECB would cut borrowing costs again in September and December. However, there is a greater risk that the central bank will implement just one rate cut as services inflation remains a major headache in the eurozone. As a result, policymakers have said there is no rush to cut interest rates.
Inflation in the Eurozone decreased to 2.5% from 2.6% in May. Meanwhile, services inflation was 4.1% in June.
EUR/USD key events today
- US Core PPI m/m
- US PPI m/m
- Preliminary mood of UoM consumers
Technical analysis of EUR/USD prices: Bullish trend continues with a higher high
On the technical side, the EUR/USD price broke above the key resistance level of 1.0850 to make a higher high. This indicates that the bullish trend remains intact. Furthermore, the bullish bias is strong as the price is trading well above the 30-SMA with the RSI near the overbought region.
–Are you interested in learning more about crypto robots? Check out our detailed guide-
The uptrend stalled after reaching the key psychological level of 1.0900. The price could pull back to retest the recently broken 1.0850 level before challenging 1.0900 for a new high.
Do you want to trade Forex now? Invest in eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
