FX.co ★ EUR/USD

EURUSD Daily Analysis The eurozone is in for another important week. On Tuesday, the eurozone will release its preliminary consumer price index for June. Headline inflation is expected to have risen to 2.0%, in line with the European Central Bank’s (ECB) medium-term inflation target. The increase was largely driven by the impact of higher energy prices this month. If it does, it would reinforce the view that the recent inflation is not structural but seasonal, as energy markets continue to react to geopolitical developments and summer demand. Core inflation, which excludes more volatile products such as energy and food, is expected to remain stable. This will reassure European Central Bank policymakers that underlying price pressures are under control. The stability of core inflation is crucial because it directly reflects developments in demand-side inflation relative to headline inflation and therefore influences the ECB’s monetary policy decisions. While unexpected factors, including positive developments, can influence market expectations about the future direction of monetary policy, the outlook remains uncertain. The European Central Bank (ECB) appears to be nearing the end of its volatile period after implementing the eighth rate cut (25 basis points) in the current quantitative easing cycle in June. The next monetary policy decision is expected on July 24 and the market consensus is in favor of a pause in monetary policy. With inflation approaching its target and borrowing costs falling significantly, the ECB has some room to maneuver. While some economists expect a final rate cut in December, a variety of external factors, including rising geopolitical risks and unstable US trade policy, could delay or prevent the next rate cut. Escalating tensions or a sudden change in global economic sentiment could force policymakers to reconsider the timing of future quantitative easing measures. The EUR/USD pair was the focus of the forex market. The EUR/USD pair reached a near four-year high last week, continuing its upward momentum and extending its short-term gains. The EUR/USD pair is being driven by the relative strength of the euro amid improving economic data and expectations of a rate cut, as well as growing concerns about a weaker US dollar. The US dollar is under pressure again due to the mixed message from the Fed, doubts about its independence and upcoming US economic data. The safe-haven flow is also slowing due to geopolitical tensions in the Middle East, which is pushing EUR/USD higher. Technically, momentum is strong, but warning signs remain. Oscillators are overbought, with the RSI above 70, a common warning sign of market exhaustion. The MACD is above the signal and zero lines, indicating the possibility of a bullish move, but the upward trend appears to be slowing down a bit. Traders should closely monitor any divergence between price action and momentum indicators, which could signal a short-term bearish move. If EUR/USD continues to rise, the next key resistance level could be near 1.1900, which corresponds to the August 2021 high. This area acts as a psychological barrier and could trigger profit-taking. A break above this area would likely confirm the uptrend and point to a more ambitious target near 1.2000. Meanwhile, immediate support lies between 1.1625 and 1.1700. A break above this area would be a key technical event and could signal a short-term trend reversal or at least a sideways phase. In that case, sellers could target the area near 1.1450. This area is a key area that lies around the previous high and low of the ascending channel. This correction will support the overall uptrend, especially as long as the price remains above 1.1300. Finally, the euro continues to rally on strong fundamentals and solid technical data, but the near-term outlook for overbought conditions warrants caution. With CPI and monetary policy expectations approaching crisis levels, the next move in EUR/USD will determine how well inflationary pressures can be contained and whether the European Central Bank (ECB) will exercise patience. The euro is currently in an uptrend, but volatility is expected to increase in the near term as the sustainability of recent gains is being tested.