The euro is hovering around $1.14 against the dollar as traders wait for the June US inflation report. Broad dollar strength has pushed nearly every major currency lower, and Fed Governor Christopher Waller says another rate hike should stay on the table if inflation refuses to cooperate.
The euro spent Tuesday morning going nowhere, hovering around $1.1380-$1.1400 as traders waited for the next catalyst. The quiet session sits inside a much larger move: since peaking just below $1.21 in late January, the euro has lost roughly 6% against the dollar as expectations for higher US interest rates boosted demand for the greenback.
Dollar pressures the whole board
This is not just a euro story. The pound remains in a broader downtrend near $1.34, even though it managed a short-term bounce of about 1.5% amid political reshuffling in the UK. The yen has fared worse, with USD/JPY trading above ¥162 and near 40-year lows, keeping it inside the zone where traders suspect Japanese officials could step in.
CPI is the next catalyst
Attention now turns to the US Consumer Price Index. Economists expect annual inflation to ease to 3.8% in June from 4.2% in May, though the print could still surprise. Core inflation, according to DailyForex, is expected to remain at 2.9%, above the Federal Reserve's 2.0% target.
Fed Governor Christopher Waller said this week that another rate hike should stay on the table if inflation refuses to cooperate, pointing to core inflation that had already been climbing before the recent oil shock. Markets currently see less than a 50% chance of a July rate hike. A hotter reading could give the dollar another lift, while a cooler one might finally hand the euro a reason to move.
Technical picture leans bearish
DailyForex reports the pair dropped to 1.1383, a few pips below this month's high of 1.1470, after Waller backed the case for higher rates. It has moved below the key support level of 1.1408, its lowest since March 13, and slipped under the 50-day exponential moving average.
The setup shows a bearish flag pattern, which the analysis reads as a continuation sign, so the pair could keep falling unless a move above resistance at 1.1470 invalidates the bearish view. Adding to the risk, DailyForex notes Brent nearing $85 and WTI hitting $77 after the US-Iran ceasefire ended, which could push inflation back up.
Sources: TradingView, DailyForex
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