The EURUSD currency pair rose above the level of 1.1000 due to a weak dollar as investors remain cautious ahead of the US inflation data to be released. The release of new data on consumer inflation could affect the trajectory of the Federal Reserve's monetary policy.
Several officials at the US central bank said on Monday that the regulator is likely to raise interest rates to reduce inflation. However, the end of the current monetary tightening cycle is nearing.
According to the CME's Fedwatch Tool, investors estimate a 95% chance of a 5.25–5.5% Fed rate hike in July. Rates are projected to remain at that level until a possible reduction in 2024.
This week the focus will be on the US Consumer Price Index data, which is due on Wednesday. The annualized data is expected to fall to 3.1% from the previous 4% figure.
If the actual level of consumption turns out to be higher than expected, it could lead to policy tightening and increase the attractiveness of the dollar. That was stated by OCBC executive director and currency strategist Christopher Wong.
On Thursday there will be some important events in Europe, including the Eurogroup meeting. Usually at the meetings ministerial representatives of different countries deal with the EU monetary policy issues, consider the prospects for inflation and parameters of monetary policy. Although the format of these meetings is informal, the Eurogroup is an important and influential body of the European Union. Decisions and comments made at the meeting may affect the mood of market participants.
The EURUSD currency pair price is forming an upward corrective trend on the D1 timeframe.
In terms of wave analysis, the price is forming the third ascending wave on the H4 timeframe. The breakout of the first wave at 1.1010 has already taken place. The upward movement may continue in the near term. The next resistance is at 1.1080.
The short-term outlook for the EURUSD is to buy.
The target is at the level of 1.1135.
Part of the profit should be fixed near the level of 1.1080.
A Stop-loss should be placed at the level of 1.0905.
The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.