EUR/USD posts fresh monthly high ahead of US Inflation

• EUR/USD rises to 1.0830 as the US Dollar remains on the back foot ahead of US Inflation and Retail Sales data.
• The US inflation data is expected to decline after remaining stubbornly higher in the first quarter of the year.
• ECB’s Wunsch expects that the likelihood of two rate cuts is very high.

EUR/USD refreshes monthly high near 1.0830 in Wednesday’s European session. The major currency pair exhibits a firm footing ahead of the release of the United States Consumer Price Index
(CPI) and the monthly Retail Sales data for April, which will be published at 12:30 GMT.

The US Dollar (USD) slumps to more than a week low even though the US Producer Price Index (PPI) report for April remained stubbornly high. The annual headline and core PPI, which excludes volatile food and energy prices, grew as expected, while monthly figures were stronger than the consensus. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, dips below the crucial support of 105.00.

It seems that firm speculation about the Federal Reserve (Fed) returning to policy normalization from the September meeting is keeping the downside pressure on the US Dollar. 10-year US Treasury yields have also dropped to 4.42%. Market expectations for the Fed to start lowering interest rates in September remained firm as Fed Chair Jerome Powell ruled out the likelihood of more rate hikes. Powell emphasized maintaining a restrictive policy framework for a longer period to bring inflation down in his speech at the annual general meeting of the Foreign Bankers' Association in Amsterdam on Tuesday. 

Daily digest market movers: EUR/USD rises as US Dollar slumps

• EUR/USD advances to 1.0830 as the market sentiment remains bullish on firm Fed rate-cut prospects for September. S&P 500 futures remain flat in the European session but hold gains near all-time highs. However, the sentiment could be volatile ahead after the release of the US consumer inflation data.
• Annual headline CPI is forecasted to have softened to 3.4% from 3.5% in March. In the same period, the core inflation, which strips off volatile food and energy prices, is anticipated to decelerate to 3.6% from the prior reading of 3.8%. Economists expect that monthly headline CPI to grow at a steady pace of 0.4% while core CPI has grown at a slower pace of 0.3% from the prior reading of 0.4%. 
• The US inflation reports for the last three months have remained hotter than expected. Due to this, investors postponed expectations for the Fed to begin reducing rates in September from March, which was anticipated at the beginning of the year. The Fed could not start lowering interest rates until it gets confidence that inflation will sustainably return to the 2%. 
• To get confidence that inflation is on track to return to 2%, price pressures must decline consistently for at least three months. Inflationary pressures remaining stubborn would force traders to pare rate-cut bets for September, while a soft inflation report will do the contrary.
• Meanwhile, the Euro remains upbeat as investors hope that higher interest rates for longer by the Fed will slow down the pace at which the European Central Bank (ECB) was anticipated to return to policy normalization. 
• On Tuesday, ECB policymaker and Banque Nationale de Belgique Governor Pierre Wunsch commented that the first two 25 basis points (bps) reductions in key ECB rates are close to a "no-brainer" but added that high rates for longer by the US Federal Reserve could lead to a slower pace of rate cuts. 
• Historically, investors underpin the US Dollar against the Euro if the policy divergence between the Fed and the ECB widens. A weak Euro brings significant business to Eurozone merchants from overseas markets. This could strengthen the economic outlook and result in higher employment and wage growth, which eventually will flare up price pressures again.
• On the economic data front, Eurostat has released a second estimate of preliminary Q1 Gross Domestic Product (GDP) data. The GDP report indicated that quarterly and annualized GDP growth were in line with the consensus and the preliminary reading at 0.3% and 0.4%, respectively. While EUR/USD didn't react to the second estimate as investors' focus remains on the US CPI data.

Technical Analysis: EUR/USD is at make or a break above 1.0800

EUR/USD rises above the round-level resistance of 1.0800. The asset has advanced to the downward-sloping border of the Symmetrical Triangle pattern formed on a daily timeframe, which is plotted from December 28 high around 1.1140. The upward-sloping border of the triangle pattern is marked from October 3 low at 1.0448. The Symmetrical Triangle formation exhibits a sharp volatility contraction.

The major currency pair is at a make-or-break near 1.0830. A breakout of the Symmetrical Triangle formation could put the Euro bulls in the driving seat for a longer period. On the contrary, sharp selling pressure could drag them toward the upward-sloping border.

The 14-period Relative Strength Index (RSI) rises to 60.00. A bullish momentum would trigger if the RSI sustains above these levels.