The euro (EUR) gained some ground, while the U.S. dollar (USD) saw a rebound on Thursday. This shift followed recent U.S. inflation figures that led to a significant reevaluation of expected rate hikes from the Federal Reserve. The EUR/USD pair climbed to the higher end of the 1.1400 range and is now testing the upper limits of its monthly horizontal channel near 1.1485.
Recent data revealed a surprising contraction in the U.S. Producer Price Index (PPI) for June, reinforcing a deflationary trend indicated by previously weak Consumer Price Index (CPI) results. This series of announcements made investors rethink the likelihood of an interest rate hike in July, lowering expectations for such a move in September as well. Consequently, the U.S. dollar fell against its main counterparts.
In Europe, the industrial production numbers released on Wednesday were not favorable, showing an unexpected shrinkage in June, which paradoxically lent some support to the euro, despite repeated calls for monetary tightening from European Central Bank (ECB) officials.
Technical analysis: Above 1.1485, next target is 1.1620 area
The current trading value of EUR/USD stands at 1.1469, showing a bullish trend in the short term, up about 0.85% over the last three days. The momentum appears positive, with the 4-hour Relative Strength Index (14) around 63 and a favorable position for the Moving Average Convergence Divergence (MACD). This suggests that buyers are still in control.
Looking at resistance levels, the first significant barrier seems to be between the 1.1485 range top and 1.1500, which is the 38.2% Fibonacci retracement of the decline seen from May to June. A breakthrough could open up to the highs recorded on June 16th and 17th, around 1.1620.
On the flip side, immediate support can be found at the July 14 low of 1.1378, just above the year-to-date low of 1.1324. If the decline continues, sellers may target the late May 2025 low at 1.1210.
