The EUR/USD exchange rate surged to a fresh multi-week high, propelled by unexpectedly soft US inflation data that renewed optimism among euro bulls. On the back of subdued consumer price index (CPI) figures, the pair rallied to an intraday peak of 1.1495, just shy of the year-to-date high of 1.1573.
This development marks a continuation of the uptrend that began in late May and reinforces the broader bullish technical structure of the pair. In this article, Gradiopexo provides a structured and insightful overview of the topic.
Soft US Inflation Data Sparks Euro Rally
The US Bureau of Labor Statistics (BLS) reported that the headline CPI climbed modestly from 2.3% in April to 2.4% in May. This was below the consensus forecast of 2.5%, signaling that inflationary pressures may be easing despite ongoing trade tensions. On a month-over-month basis, inflation slowed from 0.2% to 0.1%, reinforcing the view that price growth remains relatively contained.
Core inflation, which excludes volatile food and energy components, remained flat at 2.8%, once again falling short of the median expectation of 2.9%. These numbers point to a cooling inflationary environment, contrary to the fears stoked by the US President’s tariffs, which many analysts believed would push consumer prices higher.
The US President has intensified his rhetoric, urging the Federal Reserve to cut interest rates, claiming that elevated borrowing costs are hurting American competitiveness in the global market.
In contrast, Fed officials remain cautious, warning that tariff-related price adjustments could still feed into higher inflation over time. As such, they have signaled no imminent rate cuts, instead adopting a data-dependent stance.
Upcoming Catalysts: PPI and ECB Commentary
Looking ahead, the Producer Price Index (PPI) will be a crucial data point for the EUR/USD market. The PPI reflects corporate-level inflation, and its movement often precedes changes in consumer pricing. Forecasts suggest that headline PPI will increase to 2.6%, while core PPI is expected to climb to 3.1%.
Additionally, remarks from key European Central Bank (ECB) policymakers, including Isabel Schnabel and Luis de Guindos, will be closely monitored. Market participants are looking for clues regarding the timing and magnitude of the next ECB rate cut. If officials adopt a dovish tone, it could offset some of the euro’s momentum, although the impact may be muted if US data continues to underperform.
EUR/USD Technical Analysis: Bullish Structure Intact
On the daily chart, EUR/USD remains firmly in an uptrend, having decisively broken above the former resistance zone near 1.1213, a level that also corresponds with the September 2023 swing high and the upper boundary of a classic cup-and-handle formation.
The pair has also surged above the 50-day and 200-day simple moving averages (SMAs), reinforcing the bullish trend. The golden cross, where the 50-day SMA moves above the 200-day SMA, formed on April 2, signaling a shift in long-term momentum to the upside.
Momentum indicators confirm this bullish bias. The Relative Strength Index (RSI) is trending above 60, suggesting strong buying pressure, while the MACD histogram remains in positive territory with a widening spread between the MACD and signal lines. This supports the likelihood of further gains in the near term.
The immediate resistance level to watch is 1.1573, the current year-to-date high. A clean break above this level would invalidate the double-top reversal pattern and open the door for a potential extension toward 1.1650 and possibly 1.1700.
Key Support Levels
While the outlook remains constructive, traders should keep an eye on key support zones in case of a retracement. The first notable support lies at 1.1370, near a minor consolidation area from early June.
Further down, 1.1213, the breakout point from the cup-and-handle formation, will likely act as a strong floor. A breakdown below this level could shift sentiment, especially if accompanied by unexpectedly hawkish US data or ECB dovishness.
Summary
The EUR/USD pair is enjoying a sustained rally, driven by softer-than-expected US inflation data, a weakened dollar, and bullish technical signals. With attention turning to the Producer Price Index and ECB commentary, the next few sessions could provide further directional cues.
Until then, the uptrend appears intact, with key resistance levels in focus and support areas providing a safety net for any pullbacks. As long as the US economic data continues to underperform expectations, the euro’s advantage over the dollar is likely to persist.
