$EURUSD

The Euro is currently trading between $1.1424 and $1.1450, and the story behind this strengthening is based on a series of cold inflation data from the US.

Tuesday's June CPI data showed a year-on-year decline to 3.5%, significantly below the expected 3.8%, up from 4.2% in May. The 0.4% month-on-month drop was the largest decline in six years. Core inflation also fell below expectations, dropping to 2.6% year-on-year. Following this data, the market lowered the probability of a July rate hike from 40% to 16%, and the probability of a September hike from 74% to 60%. Wednesday's PPI data reinforced this picture, showing a 0.3% month-on-month decline, the first drop since August 2025, with core PPI also falling below expectations.

These two consecutive cold data points put significant pressure on the dollar, pushing the dollar index back to the 100.51-100.70 range, a noticeable pullback from a two-week high. On the euro side, the European Central Bank's first interest rate hike in three years in June, and the expectation of another hike this year by institutions like the MUFG, stand out as separate factors supporting the euro.

However, there is a really important warning here; caution is advised. WTI oil rose approximately twelve percent this week to around $80, while Brent approached $85, due to the three-night wave of attacks on Iran and the renewed US naval blockade. This sharp rise in energy prices directly threatens the disinflation theme, with some analysts emphasizing that if oil remains high, the Fed may reconsider raising interest rates by the end of the year. So, the current strength of the euro rests on a fragile balance between two conflicting forces: cooling inflation supporting dollar weakness, but a new inflation shock stemming from oil could quickly reverse this picture.

On the technical side, the pair continues to move within a descending channel, which has been in place since mid-April, and the pair remains below the 50 and 200-day moving averages, keeping the overall outlook bearish. The given support levels, the band starting from 1.1450 and falling to 1.1407, and the resistance levels, the band extending from 1.1470 to 1.1510, appear consistent with this descending channel structure, with the 1.1450 area already marked as the upper limit of the channel.

For those tracking dollar-linked assets and the crypto market through Gate, the key question is whether oil prices will remain consistently above $80 in the coming days, as this remains the most critical variable determining both the Fed's interest rate path and whether the euro can sustain this recovery.

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