Bearish view

Bullish view

The EUR/USD pair continued falling as a senior Federal Reserve governor supported the case for hiking interest rates, pointing to the elevated core inflation. It dropped to 1.1383, a few pips below this month’s high of 1.1470.

US Consumer Inflation Report Ahead

The EUR/USD pair dropped as traders waited for the upcoming consumer inflation report. Economists expect the upcoming report to show that the headline CPI dropped to 3.8% in June from the previous 4.2%.

Core inflation is expected to remain at 2.9%, also higher than the Federal Reserve’s target of 2.0%. Inflation likely softened a bit in June because of lower oil prices after the US and Iran reached a ceasefire deal.

In a statement on Monday, Christopher Waller, a senior Fed official, hinted that he supported hiking interest rates later this year, citing core inflation. His statement is notable as he has been one of the most dovish officials on the Fed, a move that made Trump consider him for the Chairman role.

There is a risk that inflation will resume rising this month now that the ceasefire agreement between the US and Iran has ended. In a statement in Turkey last week, Trump said that, in his view, the ceasefire was over. Since then, he has ended waivers for Iran to sell oil, launched numerous attacks, and reinstated his blockade against the country.

Crude oil prices continued rising, with Brent nearing $85 and the West Texas Intermediate (WTI) hitting $77. Gasoline prices will likely resume rising in the coming days.

The EUR/USD pair will next react to the upcoming Kevin Warsh statement to Congress. His statement will likely provide more information on what to expect from the Fed. The pair will also react to the upcoming US PPI, US retail sales, and European inflation data.

EUR/USD Technical Analysis

The EUR/USD pair has remained under pressure in the past few days. It formed a bearish flag pattern, a common continuation sign in technical analysis. It has already moved below the lower side of the bearish flag pattern.

The pair has dropped below the key support level of 1.1408, its lowest level on March 13. It has moved below the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has formed a descending channel.

Therefore, the pair will likely continue falling, potentially to the key support level of 1.300. A move above the resistance at 1.1470 will invalidate the bearish outlook.

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Crispus Nyaga is a Technical Analyst at DailyForex with more than eight years of experience as a financial analyst, coach, and trader. He specializes in technical analysis of major currency pairs and cryptocurrencies, using chart patterns, trend structure, and key indicators to frame trading scenarios for Forex and digital asset markets. Crispus has worked with well-known brokers including ATFX, easyMarkets, and OctaFX, and his market commentary has been published widely on platforms such as Seeking Alpha, InvestingCube, Capital.com, and Invezz.

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