EUR/USD Climbs Toward $1.1450 as Bulls Eye Breakout; Market Focus on Trade Talks and US CPI Data
EUR/USD surged above the $1.1420 handle on Monday, regaining bullish momentum after last week’s pullback. The pair is trading around $1.1426 after bouncing sharply from trendline support at $1.1400. With the euro benefiting from a broadly weaker US dollar and hawkish comments from European Central Bank officials, EUR/USD bulls are now targeting key resistance levels at $1.1454 and $1.1488, while market participants await the week’s critical catalysts: US-China trade negotiations and Wednesday’s US CPI report.
Weaker Dollar Drives Euro Recovery; ECB Policy Outlook Provides Additional Support
The greenback has struggled to hold onto Friday’s NFP-driven gains. Despite US nonfarm payrolls surprising to the upside at 139,000 jobs and wage growth maintaining a firm 3.9% year-on-year pace, the dollar reversed as markets braced for potential trade de-escalation between the US and China. DXY index retreated from 99.34 resistance and is now hovering near 98.93, facing technical headwinds.
In contrast, the euro is enjoying renewed support from diminishing ECB rate cut expectations. ECB member Peter Kazimir hinted Monday that the current easing cycle may be over, stating inflationary pressures suggest further cuts might no longer be necessary. Market odds of a 0.25% ECB cut in July have fallen below 30%, reinforcing euro strength. This comes as the eurozone economy shows resilience despite external headwinds, with EUR/USD posting four consecutive weeks of gains.
US-China Trade Talks in London a Key Driver of Short-Term Direction
Later today, officials from the US and China will meet in London, resuming negotiations aimed at reducing bilateral tariffs. The Trump-Xi call last week already lifted market sentiment and triggered a relief rally in both equities and EUR/USD. With the euro sensitive to risk-on flows, any signs of progress could drive the pair higher toward the $1.1457 and $1.1495 resistance zone. Conversely, if talks falter, safe-haven demand may lift the dollar and cap euro gains.
US CPI Report Poised to Be Pivotal for EUR/USD This Week
Traders are laser-focused on Wednesday’s US Consumer Price Index data, expected to show the first impact of Trump’s tariffs on inflation. Market consensus projects a 2.5% year-on-year CPI print, up from 2.3%, and core CPI at 2.9%. A hotter-than-expected number could dampen Fed rate cut bets further, providing fresh support for the dollar and testing EUR/USD’s bullish resolve. Conversely, softer CPI would likely weaken the greenback and open room for the euro to extend gains.
EUR/USD Technical Setup Signals Bullish Continuation Potential
Technically, EUR/USD remains in a robust uptrend, having respected its rising trendline and 50 EMA at $1.1409. On the hourly chart, price is approaching initial resistance at $1.1454, with bulls eyeing a breakout toward $1.1488 and potentially $1.1533. RSI sits at 57, confirming healthy bullish momentum without overbought conditions.
Support lies at $1.1400, with further downside cushion at $1.1365 and $1.1323. A decisive move below $1.1400 would shift near-term bias to neutral, but so far buyers are firmly in control. As long as EUR/USD holds above trendline support, the path of least resistance remains higher.
Euro Fundamentals Reinforce Uptrend; US Macro Surprises Remain a Risk
The euro’s underlying strength is supported by both technicals and evolving fundamentals. The ECB’s reduced rate cut expectations contrast with the Fed’s more cautious stance amid resilient US labor market data but increasing inflation risks. With the euro also benefiting from easing eurozone energy concerns and improved trade dynamics, EUR/USD remains well-positioned to challenge year-to-date highs near $1.1575 in the coming weeks.
Traders should monitor not only the outcome of US-China trade talks and US CPI this week, but also eurozone data and ECB commentary, which could further shape rate path expectations.
At this stage, EUR/USD remains a buy on dips, as long as key trendline support holds and no major risk-off shock emerges from the trade talks or US inflation data. A clear break above $1.1457 would likely accelerate bullish momentum toward $1.1533 and beyond.
