EURUSD erases gains as the US Dollar rebounds despite softer core inflation. What's next?

US Dollar Rebounds and Its Impact

Recently, despite a decline in US core inflation, the US Dollar has rebounded. This recovery may have been influenced by risk factors such as Trump's threats against Iran. The market has strengthened its predictions for Fed rate cuts, with expectations now at a 54 basis point easing by year-end. Based on this outlook, the Dollar is likely to remain in a neutral to bearish state for some time.

Eurozone Situation

On the other hand, the European Central Bank (ECB) has reaffirmed its cautious data-dependent stance, indicating that it will not respond to minor deviations from its 2% inflation target. Recent inflation data surprises have supported the ECB's neutral policy decisions.

Technical Analysis

EURUSD rallied to the key resistance level of 1.17 on the daily chart but ultimately erased all gains due to selling pressure. Currently, the price is confined between the 1.1615 level and the trendline. Sellers appear poised to continue pushing for new lows while buyers are watching for a breakthrough towards the 1.18 level. The 4-hour and 1-hour charts also show a similar trend with a downward trendline guiding selling positions.

Upcoming Catalysts

The focus ahead will be on the US Supreme Court’s decision regarding Trump’s tariffs. If tariffs are struck down, it could lead to a risk-on sentiment in the short term, negatively affecting the US Dollar. Additionally, today's US Retail Sales and PPI reports are also eagerly anticipated as they could reflect the old data with significant market implications.