EUR/USD broke out of its recent trading range on Thursday, climbing above 1.1500 for the first time in almost two months. The move was driven by renewed tariff threats from U.S. President Donald Trump and softer U.S. inflation data, which weighed heavily on the U.S. dollar (USD).
Trade Tensions Resurface, Weighing on the Dollar
The brief trade truce with China ended as President Trump warned he would impose tariffs unilaterally if a deal was not reached by the July 9 deadline, according to Bloomberg. This announcement unsettled markets and added pressure on the dollar.
U.S. Inflation Data Raises Rate Cut Expectations
The dollar was already under pressure following weaker-than-expected U.S. Consumer Price Index (CPI) data released on Wednesday. The subdued inflation numbers increased expectations that the Federal Reserve (Fed) may cut interest rates in September.
Data from the CME FedWatch tool shows that the futures market now prices a nearly 60% chance of a 25 basis point rate cut after summer, up from 50% the previous week.
Eurozone Outlook Remains Stable Amid Diverging Monetary Policies
Meanwhile, the eurozone saw little economic movement this week. However, several European Central Bank (ECB) policymakers echoed President Christine Lagarde’s message that the current easing cycle may be ending. This shift in tone, combined with strong U.S. data last week, highlighted the growing divergence between the ECB’s and Fed’s monetary policies. This divergence supported the euro’s recent gains.
Technical Analysis: EUR/USD Nears Key Resistance Levels
EUR/USD has broken out of its consolidation and is trending higher. The 4-hour Relative Strength Index (RSI) is approaching overbought levels, signaling the possibility of a short-term pullback. Despite this, any downward moves are expected to attract buying interest.
The pair faces resistance near 1.1530, close to the April 22 high of 1.1547. This is the last key hurdle before the year-to-date high of 1.1572, recorded on April 21.
On the downside, support lies around 1.1480, with earlier resistance at 1.1460 (the June 2 high) now acting as support. For bears to challenge the current bullish trend, they must push the pair below this level.
Related topics:
