The EUR/USD currency pair today soared to an alarming increase that now represents its ninth straight day of surging. The exchange rate is at or near a first peak of 1.1830. As markets continue to soar, analysts are increasingly warning that a corrective slide could be just around the corner. At the time of writing, around 1.1800, this would put the euro close to reaching the September 2021 peak of 1.1908.
The euro is trending upward for good reason. This increase is being propelled by recent trends in inflation data and commentary surrounding upcoming changes to monetary policy. The Relative Strength Index (RSI) has been climbing as well and now hovers around 75. This is indicative of the euro being overbought. At the same time, the Momentum indicator has experienced the diminishing strength of its advance but is still very much in positive territory.
European inflation data released today for the month of June came in as expected by analysts, with the compressed core annual figure still at 2%. That is a touch above the last reading of 1.9%. Meanwhile, overall inflation, as measured by the Harmonized Index of Consumer Prices (HICP), rose by 2.3% over last year, on par with last month’s results. The m/m advance of the HICP index came in at 0.3%, after 0.0% in May.
In the context of this economic backdrop, U.S. President Donald Trump has voiced demands for the Federal Reserve to lower interest rates. Despite optimism from the Biden administration’s Infrastructure Law, Fed Chair Jerome Powell and other officials have shied away from strikingly aggressive moves. They cite wildcards in the inflation picture, driven entirely by Trump’s tariffs.
Technical analysis indicates that even though the EUR/USD is displaying bullish momentum, it is still showing signs of overbought conditions. Accordingly, the 4-hour chart shows mildly bullish technical indicators, a sign that buyers are still firmly in charge of this market. Resistance levels for the euro right now versus dollar are 1.1820, 1.1845 and 1.1875. Conversely, resistance levels are at 1.1830, 1.1880 and 1.1910.
As the euro continues its ascent, market participants are closely monitoring comments from European officials regarding monetary policy and economic stability. European Commission President Ursula von der Leyen recently stated that the EU “will defend the European interest as needed. In short, all options remain on the table.”
The evolving situation regarding inflation and interest rates will likely play a crucial role in determining future movements of the EUR/USD exchange rate. Traders point to a growing wave of optimism on the euro. They need to be on their toes, as candidates for profit-taking may come after this powerful advance.