EUR/USD Daily Chart Analysis – 2024-08-15

The EUR/USD pair climbed to its highest level in seven months on Wednesday, with bullish sentiment holding strong after the U.S. CPI report triggered discussions about the scale of the Federal Reserve’s upcoming rate cuts. The CPI data for July met most forecasts, with a year-over-year increase of 2.9%, slightly below the 3.0% estimate, bolstering the view that inflationary pressures are easing. The debate over whether the Fed will reduce rates by 25bps or 50bps in September gained traction, as indicated by the CME’s FedWatch Tool, which showed a decline in the probability of a 50bps cut from 55% to roughly 40%. Nonetheless, the market still anticipates the beginning of a rate-cutting cycle, which could weigh on the dollar.

Technically, EUR/USD’s strength is underscored by the narrowing of the German-U.S. yield spread, which reached its tightest level since August 7. The pair’s breakout above several key daily moving averages and the downtrend line from 2023’s high points to sustained upward momentum, further supported by rising RSI levels on both daily and monthly charts. Looking ahead, investors will focus on U.S. economic reports, including weekly jobless claims, July retail sales, and the August University of Michigan consumer sentiment survey. Weakness in these indicators could increase the odds of a 50bps Fed rate cut in September, potentially pushing EUR/USD beyond 1.1100.