- The dollar weakened after data showed PPI rose less than 0.1% in July.
- The probability of a 50 basis point Fed rate cut in September rose from 50% to 53.5%.
- Economists expect ECB rate cuts in September and December.
EUR/USD price analysis supports a bullish bias as the euro gains against a weak dollar following soft US wholesale inflation numbers. Meanwhile, a Reuters poll found economists forecast two more cuts by the European Central Bank this year, fewer than markets expected.
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The dollar weakened after data showed US PPI rose 0.1% in July. Meanwhile, analysts had expected an increase of 0.2%. A smaller increase indicates a weakening of price pressures at the producer level.
After the report, markets raised the probability of a 50 basis point Fed rate cut in September from 50% to 53.5%. The move was small as the focus is now on the upcoming consumer inflation report.
CPI is likely to rise 0.2% in July. Meanwhile, the annual rate could remain unchanged at 3.0%. However, with recent trend numbers weaker than expected, the dollar could fall further. Moreover, if consumer inflation misses forecasts, the likelihood of a 50 basis point rate cut in September will increase. Meanwhile, a weak dollar will allow the euro to continue to rise.
Elsewhere, a Reuters poll found economists maintained their forecast for two more ECB rate cuts this year. A majority of over 80% expect rate cuts in September and December. This research boosted the euro as the outlook is less dovish than what markets expect. Traders are betting on three more ECB cuts before the end of the year.
EUR/USD key events today
- Core CPI m/m
- CPI m/m
- CPI y/y
Technical analysis of EUR/USD prices: Bulls are looking for a new high above 1.1000
On the technical side, the EUR/USD price is on the verge of making a new high above the psychological resistance level of 1.1000. The bullish bias is strong, with price well above the 30-SMA. At the same time, the bulls are quite enthusiastic with the RSI in the overbought region.
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Therefore, there is a good chance that the price will pass 1.1000 to make a higher high. On the other hand, if resistance remains firm, EUR/USD could pull back to retest the 30-SMA before continuing higher. The bias will only move if it goes below the SMA.
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