EUR/USD:US Economic Data Boosts USD Expectations,Challenging EUR

On Wednesday, the EUR/USD experienced a decline, briefly dropping below the 1.0900 level before recovering during the American session and reducing its losses. The Euro's strength is supported by expectations of a rate hike by the European Central Bank (ECB), a sentiment reaffirmed by comments from ECB President Lagarde. Simultaneously, increasing speculations of a rate hike by the Federal Reserve (Fed) in July are bolstering the US Dollar.

In terms of economic data, inflation figures from the Eurozone have begun to emerge. Italy's Harmonised Consumer Price Index in June showed a slowdown to 6.7% from 8%. On Thursday, Spain and Germany are scheduled to report their inflation data, while the Eurozone CPI will be released on Friday. The Eurozone's headline inflation is expected to decline from 6.1% to 5.6%. Additionally, a separate report published on Wednesday indicated a decrease in the GfK Consumer Confidence survey, dropping from -24.4 to -25.4. This marks the first decline since October.

Despite the decline in headline inflation, ECB members continue to emphasize persistent inflation and the need for further action. Lagarde reiterated during the ECB Forum in Sintra that rates are likely to rise in July, while also mentioning that September's decision would depend on data.

Recently released better-than-expected economic data from the United States has heightened expectations of another rate hike by the Fed at its July meeting, providing support for the US Dollar. Further data is set to be released on Thursday, including Jobless Claims and the third Q1 GDP estimate. On Friday, the Core Personal Consumption Expenditure data will be crucial. Although the recent upward movement of the US Dollar appears stronger against currencies such as the Australian and New Zealand Dollars, its strength against the Euro in the market is not as pronounced. Our analysis remains bullish, with the expectation that the price may experience a pullback in the 50% to 61.8% Fibonacci area, presenting a long setup. However, if the price falls below 1.08500, the dynamics may change, leading us to seek a bearish setup.