EUR/USD grinds chart paper above 1.0800 after Fed fails to spark rate rally

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■EUR/USD continues to chill after testing above 1.0840 this week.

■Fedspeak from Fed Chair Powell failed to deliver a dovish-enough stance.

■US inflation data to be the key print later in the week.


EUR/USD continues to settle closer to 1.0800 after a misfire in market expectations of Federal Reserve (Fed) Chairman Jerome Powell’s testimony before US Congress on Tuesday. Despite a head nod to improving inflation figures, the Fed is still leaning firmly in a cautionary stance, pulling the rug from beneath markets that were coiled in anticipation of a tonal shift from Fed policymakers.


Forex Today: Focus remains on Powell and Fedspeak


Traders are battening down the hatches for the wait to key US inflation data prints later in the week, with a smattering of Fed speakers and Fed Chair Powell’s second round of testifying due on Wednesday.


US Consumer Price Index (CPI) inflation data slated for Thursday will be the key driver of market volumes in the back half of the trading week. Investors hungry for rate cuts will be looking for CPI inflation to churn lower, but median market forecasting models broadly expect annualized core CPI for the year ended in June to hold steady at 3.4% YoY, while headline CPI inflation is expected to tick upwards to 0.1% MoM in June versus the previous flat print of 0.0%.


Initial Jobless Claims for the week ended July 5 are also on the docket for Thursday, and are forecast to tick down to 236K from the previous 238K.


Finally, German Harmonized Index of Consumer Prices (HICP) inflation figures are due early Thursday, but YoY German inflation in June is expected to hold steady at the previous print of 2.5%.


EUR/USD technical outlook


The Fiber is on a slow grind near 1.0800 after peaking earlier this week just north of 1.0840, and intraday price action is getting squeezed between downside pressure and technical support from the 200-hour Exponential Moving Average (EMA) at 1.0787.


EUR/USD looks set to run out of gas in a near-term bullish push from the last swing low near 1.0660. With momentum draining out of the Fiber, the pair is set for a tumble back below the 200-day EMA at 1.0784.


EUR/USD hourly chart


EUR/USD daily chart


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  • US GDP grew 3.4% and core PCE held at 3.1% — December is now a hike trade, not a cut trade
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