The EUR/USD pair finally made a decisive move upward after the U.S. Consumer Price Index data, following days of struggling to establish itself above the 1.0200 mark. The EUR/USD jumped to a one-month high of 1.0368 during the New York session before easing somewhat.
The deceleration of the U.S. inflation rate lifted the market's mood and weighed on the greenback, as investors are now pricing a less aggressive move from the Fed at the September meeting.
At the time of writing, the EUR/USD pair is trading at the 1.0300 area, posting a 0,9% gain on the day.
The U.S. Bureau of Labor Statistics revealed that the annual CPI inflation slowed to 8.5% in July from 9.1% in June, versus the market's consensus of 8.7%. Additionally, core inflation remained steady at 5.9% versus expectations of a 6.1% rate.
The greenback, measured by the DXY, fell to its lowest level since June 29 at 104.63 as a knee-jerk reaction to the inflation data. Yields on the 10-year U.S. note plunged to 2.675%.
Investors have raised the bets of a 50 bps hike by the Fed to 62.5%, while on Tuesday, chances stood at 32%. At the same time, the odds of a bigger hike of 75 pbs have decreased to 37.5%.
From a technical standpoint, EUR/USD's short-term outlook has turned slightly bullish, according to the daily chart, with the price advancing further above the 20-day SMA.
The RSI broke above its midline after being rejected twice this month, while the MACD printed a higher green bar, indicating growing buying interest.
Immediate resistance levels are seen at the 1.0370 and the 1.0400 levels, followed by the upper end of a descending channel at around 1.0415. A decisive break above this level would improve the euro's perspective.
On the other hand, supports are now seen at the 20-day SMA, currently at 1.0187, followed by the 1.0100 psychological level, which is being reinforced by the channel's midline.