The EUR/USD strengthens with all eyes on Eurozone and U.S. inflation data

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The EUR/USD marks a new weekly high at 1.0880 in Tuesday’s European session. The EUR/USD strengthens amidst weakness in the U.S. Dollar (USD) and increasing uncertainty about the pace at which the European Central Bank (ECB) will reduce key interest rates after the June meeting.

The U.S. Dollar Index (DXY), which tracks the value of the U.S. Dollar against six major currencies, extends its decline to 104.40. The U.S. Dollar faces pressure despite investors’ expectations of the Federal Reserve (Fed) cutting interest rates starting from the September meeting having significantly faded.

The solid economic outlook for the United States and policymakers’ hawkish stance on interest rates have compelled traders to scale back their bets on rate cuts.

This week, market speculation regarding Fed rate cuts will be guided by April’s Personal Consumption Expenditures (PCE) Price Index data, which will be released on Friday. It is estimated that core PCE inflation data, the Fed’s preferred inflation measure, remained steady on both a monthly and yearly basis.

Technical Analysis: EUR/USD marks a new weekly high at 1.0880

The EUR/USD rises to 1.0880 ahead of crucial Eurozone/U.S. inflation data. The pair indicates broader strength as it firmly holds the breakout of the symmetrical triangle chart pattern formed on a daily timeframe.

The short-term outlook for the shared currency pair remains firm as it trades well above all short to long-term EMAs.

The 14-period RSI has fallen into the 40.00-60.00 range, suggesting that momentum, which was tilting to the upside, has moderated for now.

The major currency pair is likely to reclaim a two-month high around 1.0900. A decisive breakout above this level would lead the pair towards the March 21 high around 1.0950 and the psychological resistance at 1.1000. However, a move downwards below the 200-day EMA at 1.0800 could push it further down.