If US CPI surpasses forecasts, EUR/USD will drop, strengthening the Fed’s stance and stabilizing fees.

Trump calls for interest rate cuts, threatens more tariffs and seals Indonesia’s trade agreement.

Germany’s Zew Sentiment jumped to 52.7, the highest since February 2022.

The EUR/USD pair dipped by 0.55% on Tuesday, reflecting the Federal Reserve’s current approach after a recent US inflation report indicated rising prices. This led traders to reassess expectations around a potential rate cut during the Fed’s July meeting. As of this writing, the pair was quoted at 1.1599, having peaked at 1.1694 earlier.

In June, the Consumer Price Index (CPI) exceeded both headline and core estimates. Meanwhile, President Donald Trump urged the Fed to reduce interest rates, announced a trade agreement with Indonesia, and implied that further tariffs on Russia may be on the table.

Susan Collins, President of the Boston Federal Reserve, mentioned her concern over increasing prices that could follow the tariffs.

On another front, the European Union’s Economic Dashboard reported an increase in Germany’s Zew Economic Sentiment Index to 52.7, surpassing June’s anticipated score of 50.4 and up from the previous reading of 47.5. This represents the highest level since February 2022.

Daily Digest Market Movers: EUR/USD for backfoot on uncertainty regarding EU-US trading

• The recent US inflation figures revealed a 2.7% year-on-year rise in the consumer price index (CPI) for June, aligning with market forecasts. The Core CPI stood at 2.9%, slightly below the anticipated 3.0% but still over the Federal Reserve’s target of 2%. In light of this, the money market has reduced its speculation regarding a potential rate cut during July.
• This has led to expectations of a 50 basis point (BPS) easing, with investors anticipating cuts of over 43 bps by year’s end.
• Trump has announced a new trade deal with Indonesia, indicating a 19% obligation while US exports will be exempt from customs duties. He mentioned that Indonesia plans to purchase $15 billion in American goods, including $4.5 billion in American food products and 50 Boeing jets.
• The Wall Street Journal noted that the EU is considering retaliatory tariffs on US goods if trade negotiations do not succeed, specifically targeting aircraft and alcohol. EU Trade Commissioner Sefcovic was set to discuss matters with USTR Jamie Greer in the evening.
• Trump’s correspondence with the EU has raised concerns for the European Central Bank (ECB), although traders seem confident that there won’t be any major changes in ECB policy at the next meeting.
• According to Handelsblatt, Joachim Nagel from the ECB emphasized the need for stability in the ECB’s rate setting.

Euro Technology Outlook: EUR/USD clears 20-day SMA and downside eye

After surpassing the 20-day Simple Moving Average (SMA) of 1.1679, the EUR/USD holds a neutral to bearish outlook. Sellers appear to be targeting further declines. The Relative Strength Index (RSI) shows bearish momentum but has flattened, suggesting potential near-term adjustments.

If the EUR/USD falls below 1.1600, the next level of support may be the 50-day SMA at 1.1481, followed by 1.1400 and then 1.1254, which aligns with the 100-day SMA. Conversely, should the pair reclaim the 20-day SMA, a movement toward 1.1700 could be anticipated, potentially reaching the July 20 high of 1.1800 with the recent peak at 1.1829 serving as an additional target.