The EUR/USD price analysis turned bullish as the euro firmed against a weak dollar. However, the pair pulled back slightly on Tuesday as political uncertainty continued to pressure the Eurozone currency ahead of elections in France. Investors were also focused on the US presidential debate coming on Thursday. 

The euro got some relief on Monday as the dollar fell ahead of more inflation data from the US. However, the outlook for the currency remains clouded, with elections in France starting on Sunday. There have been concerns in the market that a new government could increase spending, worsening the already weak financial state. As a result, the euro could end the month with a 1% loss. 

On the other hand, elections in the US will come in November. However, markets will pay attention to the presidential debate on Thursday, which could impact the dollar. 

Elsewhere, investors have raised bets for a Fed rate cut in September since the May inflation figures. Furthermore, although PMI data on Friday revealed further expansion in the manufacturing and services sector, the survey also showed a decline in inflation. Therefore, price pressures are on a downtrend, which could pressure the Fed to start cutting interest rates. 

However, policymakers have remained cautious as they await more data to gain confidence that the downtrend will continue. Consequently, the PCE price index, which is the Fed’s preferred measure of inflation, will significantly impact the outlook for policy. Economists are projecting a decline that would boost rate-cut bets and weaken the dollar.

EUR/USD key events today

• US CB Consumer Confidence

EUR/USD technical price analysis: Channel breakout signals shift in sentiment to bullish

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EUR/USD 4-hour chart

On the technical side, the EUR/USD price has broken out of its bearish channel, indicating a possible reversal. Additionally, the price has broken above the 30-SMA, marking a shift in sentiment to bullish. At the same time, the RSI now trades in bullish territory above 50.

This shift in sentiment came after the RSI made a bullish divergence with the price. This was a sign that bearish momentum was weak. Moreover, the price made a double bottom at the 1.0680 key level, showing bears could no longer make lower lows. If the price stays above the 30-SMA, it will soon revisit the 1.0800 resistance level.

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