EUR/USD – Bulls Regain Momentum Post-CPI, But Critical Resistance Looms
EUR/USD – Bulls Regain Momentum Post-CPI, But Critical Resistance Looms
EUR/USD bulls seized control during Tuesday’s New York session, driven sharply higher by softer-than-anticipated U.S. inflation data. The pair initially opened near 1.1610 and briefly tested intraday lows at 1.1599; however, robust buying interest quickly emerged following the CPI release, propelling EUR/USD to an intraday peak of 1.1698 before settling around 1.1670, marking a 0.48% daily gain.
The fundamental catalyst underpinning this bullish momentum was the U.S. July CPI report, which moderated fears of hotter inflation. Year-over-year headline inflation slightly undershot market expectations, printing at 2.7% versus the anticipated 2.8%, while core CPI came in modestly above estimates at 3.1%. This subdued inflation print triggered a decline in U.S. Treasury yields, softened the U.S. dollar broadly, and notably narrowed U.S.-German 2-year yield spreads to their tightest level since April 2025, significantly eroding the dollar’s relative yield advantage.
Correlated market dynamics further reinforced EUR/USD’s upside trajectory. Gold prices rallied, equities strengthened, and USD/CNH weakened, collectively reflecting improved risk sentiment and reduced dollar appeal, which directly benefited the euro.
From a technical perspective, EUR/USD’s bullish daily candle, characterized by a strong intraday reversal from sub-1.1600 levels, underscores resilient buying support. Key daily moving averages—10-, 21-, and 55-DMAs—all remain comfortably below the current price, providing strong short-term dynamic support around the 1.1590–1.1610 area. Momentum indicators further confirm bullish conditions, with both daily and monthly RSI readings trending positively and firmly above neutral thresholds.
Despite these bullish indicators, EUR/USD still faces formidable technical resistance. Tuesday’s intraday peak at 1.1698 aligns closely with early August highs, forming an immediate barrier. More significant resistance resides slightly higher, near the July peak at 1.1735. The pair’s inability to decisively break above these key hurdles would suggest ongoing consolidation rather than a sustained bullish breakout.
On the downside, robust support emerges initially at the 55-day moving average at 1.1592, followed by the critical daily Ichimoku cloud top near 1.1560. A daily close below these key supports would significantly weaken bullish sentiment and could trigger corrective pullbacks toward deeper supports around 1.1500–1.1520.
In conclusion, EUR/USD bulls regained the short-term advantage following Tuesday’s CPI-driven rally. Traders should closely monitor resistance levels at 1.1698–1.1735 for potential bullish breakouts. Failure to clear these hurdles, however, could keep the pair range-bound, emphasizing tactical trading opportunities near support levels, pending clearer directional conviction.