Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1600.
- Add a stop-loss at 1.1350.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1350.
- Add a stop-loss at 1.1600.
The EUR/USD exchange rate rebounded to the highest point since April after the US published the latest inflation numbers. It rose to a high of 1.1495, a few pips below the year-to-date high of 1.1573.
Soft US inflation data
The EUR/USD pair rallied after the Bureau of Labor Statistics showed that the headline consumer inflation report rose from 2.3% in April to 2.4% in May, lower than the median estimate of 2.5%. The figure dropped from 0.2% in April to 0.1% in May on a year-on-year basis.
Core inflation, which excludes the volatile food and energy price,s remained unchanged at 2.8%, also lower than the median estimate of 2.9%.
These numbers mean that inflation is not rising as fast as what analysts expected because of Donald Trump’s tariffs.
As a result, Trump continued to push the Fed to cut interest rates, arguing that elevated rates were making the US lose its competitive edge against other countries like China and the European Union.
The Fed still believes that inflation will keep going up as companies adjust their prices because of tariffs. This explains why officials have ruled out cutting rates in the next meeting.
The next key catalyst for the EUR/USD pair will be the upcoming producer price index (PPI) data. PPI looks at inflation in the corporate space. Economists expect the data to show that the headline and core PPI figures rose to 2.6% and 3.1%, respectively.
The pair will also react to statements by several European Central Bank (ECB) officials like Isabel Schnabel and Luis de Guindos. These officials will likely talk about the next ECB rate cut.
EUR/USD technical analysis
The daily chart shows that the EUR/USD exchange rate has been in a strong uptrend in the past few days and has moved to the highest point since April 22.
It has moved above the key support level at 1.1213, the highest swing in September last year and the upper side of the cup-and-handle point.
The pair has moved above the 50-day and 200-day moving averages, with the golden cross pattern happening on April 2. Therefore, the pair will likely continue rising as bulls target the year-to-date high of 1.1573. Moving above that level will be key because it will invalidate the double-top pattern.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.