• Fed Chair Powell said policymakers needed more confidence inflation was falling.

• US inflation fell for the first time in four year in June.

• Investors pushed up chances for a September rate cut to 93%.

The EUR/USD weekly forecast is bullish as the dollar falls after a softer-than-expected US inflation report.

Ups and downs of EUR/USD

The euro had a bullish week where the dollar ended lower amid an increase in Fed rate cut expectations. At the same time, there was relief as the cloud of political uncertainty in France lifted after the last round of elections.

During the week, Fed Chair Powell spoke with a cautious tone, saying policymakers needed more confidence inflation was falling. As a result, the dollar strengthened. However, this move reversed when the US consumer inflation report came out.

Inflation fell for the first time in four year in June. This surprised economists who had expected it to increase. As a result, investors pushed up chances for a September rate cut to 93%. Meanwhile, wholesale inflation accelerated in June.

Next week’s key events for EUR/USD

Next week’s calendar for EUR/USD will be light with the ECB bank lending survey and the US retail sales report. After a week of heavy inflation data, markets will just focus on the state of consumer spending in the US.

The recent trend has been poor economic figures showing weakness in the economy. Therefore, there is a high chance this will continue. A decline in retail sales will pile more pressure on the Fed to start lowering interest rates.

On the other hand, if the report beats estimates, it could lead to a decline in Fed rate cut expectations. Still, it would be one positive report after a series of poor ones.

EUR/USD weekly technical forecast: Bulls prepare to break the 1.0900 resistance

On the technical side, the EUR/USD price has reached the 1.0900 key resistance level after a strong bullish move. This has put the price well above the 22-SMA supporting a bullish bias. At the same time, the RSI is quickly approaching the overbought region, showing a surge in bullish momentum.

In the coming week, there is a high chance the price will break above 1.0900 to make a higher high. This would confirm a new bullish trend after the first higher low near the 1.0700 key level. Moreover, it would clear the path for a rally to the 1.618 Fib extension level.

https://www.forexcrunch.com/blog/2024/07/14/eur-usd-weekly-forecast-us-dollar-slips-on-low-inflation/