The next hurdle comes at 1.1140

• EUR/USD advanced to fresh 2024 highs around 1.1050 on Wednesday.
• Dola price action remained modest after US CPI data.
• The next focus will be the launch of US retail sales on Thursday.

EUR/USD extended gains for a third straight day on Wednesday, hitting fresh YTD highs near 1.1050 amid continued decline around the US dollar (USD).

Meanwhile, the greenback managed to rally after returning to multi-day lows in the 102.30-102.25 band as measured by the US Dollar Index (DXY) as investors continued to assess the latest US inflation numbers, where The CPI maintained its downward trend. in July.

Following the CPI data, expectations for a half-point rate cut by the Federal Reserve (Fed) in September lost ground in favor of a smaller move. Along those lines, CME Group’s FedWatch tool sees the probability of a 25bps rate cut rising to nearly 65%.

While the European Central Bank (ECB) has remained silent, Fed policymakers are expected to share their outlook as the September meeting approaches. Over the weekend, FOMC Governor Michelle Bowman, typically known for her bullish attitude, took a more dovish approach, acknowledging “welcome” progress in reducing inflation in recent months but also noting that it remains “uncomfortably above ” Fed’s 2% target and vulnerable. to upward pressure.

If the Fed opts for more significant rate cuts, the policy gap between the Fed and the ECB could narrow over the medium to long term, potentially supporting a EUR/USD rebound, especially as market participants anticipate two more rate cuts interest by the ECB at this time. year.

However, in the longer term, the US economy is expected to outperform Europe, suggesting that any weakness in the greenback could be short-lived.

A look at what’s ahead from a data standpoint: Thursday’s US retail sales are also expected to provide key insights into the overall health of the US economy and the validity of recent recession concerns.

Closer to home, another revision saw GDP growth in the enlarged euro area rise by 0.35tt in Q2 and by 0.6% y-o-y, while industrial production fell by 3.9 % in the year to June.

EUR/USD daily chart

EUR/USD short-term technical outlook

Further north, EUR/USD is expected to challenge the 2024 high of 1.1047 (August 14) before reaching the December 2023 peak of 1.1139 (December 28).

On the downside, the pair’s next target is the 200-day SMA at 1.0837, followed by the weekly low of 1.0777 (August 1) and the June low of 1.0666 (June 26), all of which came before of the May low of 1.0649 (May 1).

Looking at the big picture, the pair’s uptrend should continue if it remains above the important 200-day SMA.

So far, the four-hour chart indicates a strong increase in the positive bias. The initial resistance level is 1.1047, ahead of 1.1132. On the other hand, there is immediate contention at 1.0881, which is ahead of the 200-SMA of 1.0864 and 1.0777. The Relative Resistance Index (RSI) rose to around 73.