Euro regains 1.1000 and climbs to weekly highs ahead of US CPI

• Euro manages to surpass the 1.1000 hurdle vs. the US Dollar.
• Stocks in Europe kickstart the session in a positive tone.
• EUR/USD rises to multi-day tops near 1.1030.
• The USD Index (DXY) puts the 102.00 support to the test.
• Final CPI in Italy rose 5.9% YoY in July.

The Euro (EUR) remains on a path of recovery against the US Dollar (USD), and this is currently prompting optimism for EUR/USD to surpass the significant psychological level of 1.1000 and go even higher. This positive momentum started with the opening of the trading session in the euro area on Thursday.

The increased positive sentiment in terms of risk appetite is causing downward pressure on the Greenback, leading to further weakening of the USD Index (DXY), which is approaching the critical level of 102.00.

The pair's upward movement can also be attributed to the ongoing positive performance of German 10-year bund yields. Meanwhile, the direction in the US money market is still uncertain, with no clear trend emerging so far. This uncertainty prevails just before the important release of the US inflation data for July, as measured by the Consumer Price Index (CPI).

Looking at the bigger picture in terms of monetary policy, there haven't been any significant changes. Investors continue to expect that the Federal Reserve will keep its current interest rates unchanged for the remainder of the year. On the other hand, the European Central Bank (ECB) is currently grappling with internal disagreements within its Council regarding the continuation of its tightening measures post-summer.

Apart from the upcoming CPI results in the US economic calendar, there are also regular weekly events such as the Initial Jobless Claims data, as well as speeches by important figures including Philly Fed's Patrick Harker, who holds a voting position and is considered a hawkish voice, and Atlanta Fed's Raphael Bostic, another voting member for 2024 who also leans hawkish.

Daily digest market movers: Euro extends the optimism above 1.1000

• The EUR advances to weekly tops past 1.1000 vs. the USD.
• The USD Index (DXY) comes closer to the 102.00 zone on Thursday.
• The appetite for the riskier assets prevails so far.
• Italian inflation figures showed the CPI rising 5.9% YoY in July
• Investors remain of the view that the Fed could remain on hold in H2 2023.
• The US CPI for the month of July takes centre stage later in the session.

Technical Analysis: Euro now looks to clear 1.1040

EUR/USD accelerates the recovery and leaves behind the key barrier at 1.1000 the figure amidst further weakness surrounding the US Dollar.

The continuation of the ongoing bullish move could motivate the pair to challenge the August top at 1.1041 (August 4) prior to the weekly high at 1.1149 (July 27). If the pair surpasses this level, it could alleviate some of the downward pressure and potentially test the 2023 peak of 1.1275 (July 18). Once this region is breached, significant resistance levels become less prominent until the 2022 high at 1.1495 (February 10), closely followed by the round level of 1.1500.

On the other hand, If EUR/USD breaks below the August low of 1.0912 (August 3), it could indicate a potential downward movement towards the July low of 1.0833 (July 6) ahead of the significant 200-day SMA at 1.0766, and eventually the May low of 1.0635 (May 31). Deeper down, there are additional support levels at the March low of 1.0516 (March 15) and the 2023 low at 1.0481 (January 6).

Furthermore, the positive outlook for the EUR/USD pair remains valid as long as it remains above the important 200-day SMA.