EUR\/USD pushed higher on Thursday towards the top of its monthly range near 1.1485, with the pair trading at 1.1469 after gaining about 0.85% over the last three days. The US Dollar eased after June US Producer Price Index (PPI) data contracted against expectations, reinforcing the deflationary message from the prior day\u2019s softer Consumer Price Index (CPI). The shift in inflation data reduced market pricing for a near-term Federal Reserve (Fed) rate rise, while in Europe European Central Bank (ECB) officials continued to argue for tighter policy even as June Industrial Production showed an unexpected contraction.<\/p>\n\n
From a technical perspective, the four-hour Relative Strength Index (14) sits around 63 and the Moving Average Convergence Divergence (MACD) remains in positive territory. Resistance is clustered between 1.1485 and the 38.2% Fibonacci retracement area near 1.1500, with a break higher opening the June 16 and 17 highs around 1.1620. Support is seen at the July 14 low of 1.1378, then the year-to-date trough at 1.1324, followed by the late-May 2025 low at 1.1210.<\/p>\n\n
We recommend that derivative traders closely watch the 1.1485 level on EUR\/USD for a potential bullish breakout in the coming weeks. If the pair successfully breaches the 1.1500 resistance zone, we should position for a rally toward 1.1620 using long call options. This bullish bias is supported by strong momentum, with the four-hour Relative Strength Index currently sitting near a healthy 63.<\/p>\n\n
Our positive outlook is backed by recent US inflation data, where the Producer Price Index unexpectedly contracted alongside cooling consumer prices. Historically, when US wholesale and consumer inflation cool faster than expected, the US Dollar Index has dropped by an average of 1.5% over the following month as rate hike expectations fade. This cooling trend has forced investors to scale back expectations for future Federal Reserve rate hikes, weakening the greenback.<\/p>\n\n
On the other side of the Atlantic, hawkish comments from European Central Bank officials are keeping the Euro resilient despite weak industrial production data. Eurozone inflation has historically remained sticky during these economic phases, giving the ECB more reason to push for higher interest rates. This policy divergence between the Fed and the ECB makes EUR\/USD call options an attractive play.<\/p>\n\n
However, if the pair fails to break above the 1.1500 ceiling, we should prepare to buy short-term put options targeting support at 1.1378. A further decline could expose the year-to-date low of 1.1324, or even the late-May 2025 low of 1.1210. Because current momentum indicators remain positive, we should keep any downside protection tight and focus primarily on the breakout potential.<\/p>\n\n\n\n