The pair will likely keep rising as bulls target the 50% retracement level at 1.0380 ahead of the ECB interest rate decision.
 

Bullish View

• Buy EUR/USD and set a take-profit at 1.0380.
• Add a stop-loss at 1.0150.
• Timeline: 1 day.
   

Bearish View

• Set a sell-stop at 1.020 and a take-profit at 1.0150.
• Add a stop-loss at 1.02500.

The EUR/USD currency pair recovery accelerated after the strong European consumer inflation data. The pair rallied to the highest point since early this month as investors refocused on the upcoming ECB interest rate decision. It is trading at 1.0230, which is about 2.20% above the lowest point this month.
 

US Dollar Retreats

The EUR/USD pair rallied as the US dollar continued its downward trend. The dollar index has fallen in the past three straight days as investors lower their expectations for the next Fed meeting.

After last week’s strong US inflation data, many analysts started predicting that the Federal Reserve will hike interest rates by 100 basis points. Now, it seems like analysts are scaling down their expectations of the size of the next hike. Most of them believe that the Fed will hike interest rates by 0.75%.

The EUR/USD also rose after the US published relatively weak building permits and housing starts data. According to the Commerce Department, housing starts declined by 2% to 1.56 million in June. In the same period, building permits declined by 0.6% as homebuilder sentiment crashed to the lowest level on record. The US will publish the latest existing home sales data.

Meanwhile, data from Europe showed that the bloc’s inflation is still a big challenge. According to Eurostat, the bloc’s inflation surged from 8.1% in May to 8.6% in June. That was the highest figure ever recorded. Excluding the volatile food and energy prices, inflation fell from 3.8% to 3.7%.

These numbers came as the market is waiting for the upcoming interest rate decision by the European Central Bank (ECB). The bank is expected to deliver its first interest rate hike in more than a decade. Some analysts expect that the ECB will hike by 0.25% while others see it rising by 0.50%.
 

EUR/USD Forecast

The EUR/USD pair rose to a high of 1.0268, which was the highest level since June 6th. This price was along the 38.2% Fibonacci Retracement level. It also managed to move above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has risen to the overbought point. It is also slightly above the Ichimoku cloud.

Therefore, the pair will likely keep rising as bulls target the 50% retracement level at 1.0380 ahead of the ECB interest rate decision.

(Click on image to enlarge)

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