EUR/USD Price Analysis: Climbs on Improved German ZEW Data

• There was an unexpected improvement in German investor morale for June.

• Europe’s largest economy slipped into recession in the first quarter of this year.

• The US consumer price inflation data could impact the Fed’s policy meeting.

Today’s EUR/USD price analysis is bullish. On Tuesday, the ZEW economic research institute reported an unexpected June improvement in German investor confidence. However, the institute cautioned about the persistent challenges export-focused sectors face in the weak global economy.

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The economic sentiment index from the institute remained in negative territory at -8.5 points, up from -10.7 points in May. This improvement followed three consecutive months of decline. Still, Germany grapples with ongoing economic difficulties, having initially managed to ward off the feared energy crunch in winter 2022/23.

Notably, Europe’s largest economy slipped into recession in the first quarter of this year due to a combination of factors. These included reduced spending by consumers impacted by inflation and the sudden halt of Russian energy imports following the invasion of Ukraine.

Elsewhere, investors eagerly awaited US inflation data, causing a slight decline in the dollar on Tuesday. The US consumer price inflation data release could impact the Fed’s policy meeting.

According to Jane Foley, head of FX strategy at Rabobank, the dollar’s decrease is partly due to the market being “priced for a pause” by the Fed.

In May, the Fed raised its target rate range to 5% to 5.25%, but traders believe there is a 77% probability that the Fed will keep rates steady this week. Moreover, there is a high chance another 25 basis point hike will occur in July.

EUR/USD key events today

Investors eagerly await the US inflation report that will give more clues on the Fed’s next step. Economists expect a decline in headline inflation, with core inflation remaining elevated.

EUR/USD technical price analysis: Bulls break above 1.0785 and eye 1.0825.

After a long struggle, the EUR/USD finally broke above the 1.0785 resistance level to make a higher high in the bullish trend. The bullish bias is strong, with the price far above the 30-SMA and the RSI near the overbought region.

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Moreover, after the break above 1.0785, bulls will look to retest the next resistance level at 1.0825. A bullish bias will remain if the price stays above the 30-SMA resistance and the RSI above 50.

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