Bullish view

• Buy the EUR/USD pair and set a take-profit at 1.0870.
• Add a stop-loss at 1.0800.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.0815 and a take-profit at 1.0750.
• Add a stop-loss at 1.0900.

(Click on image to enlarge)

The EUR/USD pair remained in a consolidation phase on Thursday morning as the focus shifted to the upcoming German and US inflation data. It was trading at 1.0820, a few points below this month’s high of 1.0845.
 

US inflation data

The EUR/USD exchange rate will likely show some volatility on Thursday as Germany and the US publish their June inflation data.

Based on the preliminary figure, analysts expect the data to show that consumer prices in Germany dropped from 2.4% in May to 2.2% in June. The harmonised inflation figure is expected to drop from 2.8% to 2.5%.

These numbers will confirm that European inflation continued dropping in June, which is a positive move for the European Central Bank (ECB). The ECB has already delivered one rate cut and hinted that more are coming later this year.

The most important data to watch on Thursday will be the US inflation report. Economists polled by Reuters expect that the country’s inflation rose from 0.0% in May to 0.1% in June. On an annualised basis, the figure is expected to have moved from 3.3% to 3.2%.

The core CPI, which excludes the volatile food and energy prices, is expected to come in at 3.4%. If these numbers are correct, they will mean that inflation has become stubbornly high and is struggling to move to the Federal Reserve’s target of 2.0%.

These numbers will come after this week’s testimony by Jerome Powell, the head of the Federal Reserve. In it, he expressed openness to cut interest rates but only if inflation continued falling.

Economists believe that the Fed will start cutting either in the September of December meeting. It will have to decide on whether to focus on lowering inflation or preventing a hard landing.
 

EUR/USD technical analysis

The EUR/USD exchange rate has moved sideways in the past few days as traders waited for the upcoming US inflation data. On the 4H chart, it has remained above the Woodie pivot point and is between the 50% and 61.8% Fibonacci Retracement point.

The pair has also found support at the 50-period and 25-period Exponential Moving Averages (EMA). However, the two lines of the MACD indicator have formed a bearish crossover, which is a bearish sign.

Therefore, the pair’s outlook is neutral with the key support and resistance levels to watch being at 1.0750 and 1.0872 (1R of Woodie pivot point).

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