EUR/USD Price Analysis: Dollar on Back Foot After Fed Comments

• The dollar hovered near a two-month low on Tuesday.

• Investors await US inflation data, which could influence the Fed’s decision to end rate hikes sooner.

• German inflation experienced an increase in June, breaking the trend of a steady decline.

Today’s EUR/USD price analysis is bullish. On Tuesday, the dollar hovered near a two-month low as the market anticipated the US inflation report.

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This report could influence the Federal Reserve’s decision to end rate hikes sooner. Furthermore, investors will assess whether price pressures continue to decrease, offering insights into the future interest rate outlook. 

On Monday, investors analyzed Federal Reserve officials’ remarks emphasizing the need for additional rate hikes due to persistent inflation. However, they also said the central bank was nearing the end of its current cycle of tightening monetary policy. 

Notably, economists surveyed by Reuters predicted a 3.1% rise in the headline inflation for June, following a 4% increase in May. This would indicate the lowest reading since March 2021. Moreover, the core rate, expected to decline for the third consecutive month to 5% from 5.3%, still exceeds the Fed’s 2% target by more than double.

Despite last week’s employment report revealing fewer-than-expected additions to non-farm payrolls, it had minimal impact on rate expectations.

Elsewhere, German inflation rose in June, breaking the trend of steady decline observed since the beginning of the year. On Tuesday, the federal statistics office confirmed that German consumer prices rose by 6.8% year-on-year in June. This rebound in year-on-year inflation during the second quarter can be primarily attributed to base effects. These include the fuel discount implemented last year and a temporary reduction in rail fares.

EUR/USD key events today

All focus is on the US inflation report coming tomorrow, as no key events from the US or the Eurozone are coming out today.

EUR/USD technical price analysis: Uptrend pauses to retest 1.1001, targets 1.1040.

EUR/USD has made new highs above the 1.1001 key level, making strides in the new bullish trend. Moreover, it trades far above the 30-SMA, indicating a steep move. Additionally, the RSI points to stronger bullish momentum near the overbought region.

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The price is currently retesting the recently breached 1.1001 key level. From here, we might see bulls return to push the price to the next resistance at 1.1040.

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