The EUR/USD pair is currently approaching one of its most sensitive turning points, not because recent price action has established a clear direction on its own, but because the market is waiting for a fundamental catalyst capable of breaking the equilibrium that has dominated trading over the past few days.
The pair is trading near 1.1546 within a relatively narrow range, while remaining below the 100-day simple moving average, currently around 1.1567. This is a level I view as the first major technical gateway for any sustainable upside move.
In my view, the current calm in EUR/USD does not necessarily signal an absence of direction. Instead, it could represent a period of momentum accumulation ahead of a more decisive move.
The market is currently balancing two opposing forces. On one side, the dollar remains supported by inflation concerns and the possibility that U.S. monetary policy could remain restrictive for longer. On the other, pressure on the dollar is building as expectations for further rate hikes fade and uncertainty surrounding the economic outlook and the Federal Reserve’s policy path persists.
This makes U.S. inflation data the key variable in determining which side will take control of the next major move.
The release of the U.S. Consumer Price Index comes at a particularly sensitive time, especially with expectations pointing to a 0.1% monthly increase in headline inflation in July and a slowdown in the annual rate to 3.4% from 3.5%. Core CPI is also expected to rise by 0.2% on a monthly basis.
For markets, however, the headline figure itself is not necessarily the most important factor; what matters is how far the actual reading deviates from expectations. A stronger-than-expected reading could trigger a repricing of U.S. rate expectations and support the dollar, while a softer reading could strengthen expectations for monetary easing and give the euro more room to advance.
This is precisely why I believe the market’s reaction will matter more than the inflation number itself. If the data comes in above expectations, we could initially see a stronger dollar and renewed pressure on the euro. However, I would not consider a sharp initial decline in EUR/USD to be a definitive bearish signal unless it develops into a clear technical break of key support levels. During major data releases, markets often move aggressively in the initial direction before reversing once traders fully digest the figures and reassess the interest-rate outlook. For me, therefore, the price action after the CPI release will be more important than the first reaction immediately after the announcement.
From a technical perspective, the picture appears neutral with a slight bullish bias. The pair remains above a number of important moving averages, while the RSI is showing positive but not excessive momentum. This suggests that buyers have not lost control despite their inability so far to break above the 100-day moving average. At the same time, holding above the nearby 1.1513–1.1517 support zone keeps the short-term structure intact and leaves the door open for another attempt at the key resistance area.
In my view, a break above 1.1567 followed by a clear close above the 100-day moving average would be the most important technical signal that the pair is transitioning from a consolidation phase into a new bullish move. If buyers manage to establish the area as support, the outlook could shift significantly and attention would gradually turn toward higher levels, particularly if the breakout is accompanied by lower U.S. Treasury yields and a weaker dollar index. Repeated failure at this level, however, would keep EUR/USD trapped within its current range and delay the next directional move until a fresh catalyst emerges.
On the fundamental side, I tend to believe that the medium-term outlook may be more favourable for the euro than current price action suggests. Dollar weakness is not solely a function of interest-rate expectations; valuation considerations also matter, along with the possibility of continued pressure on U.S. asset yields if expectations for monetary policy begin to shift. Recent banking forecasts have pointed to the potential for EUR/USD to gradually rise toward 1.18 over the medium term. This broadly aligns with the scenario I consider possible if the dollar begins to lose some of the monetary-policy support it has enjoyed in recent months.
At the same time, I do not expect the path toward 1.18 to be straightforward. EUR/USD must first overcome the resistance created by the 100-day moving average and then prove that it can turn the breakout level into a reliable support zone. If that happens, markets could gradually begin pricing in a more constructive outlook for the euro, particularly if U.S. inflation comes in below expectations or broader inflation indicators show a more convincing slowdown. Conversely, if the CPI reading comes in significantly hotter than expected, this scenario could be postponed, with the pair potentially returning to test the 1.1510 area and then 1.1460 before the outlook becomes clearer.
Ultimately, I believe EUR/USD is approaching a genuine decision point. The current sideways price action does not change my view that the market may be preparing for a larger move, but I would not pre-empt the data or treat either direction as a certainty. For me, U.S. CPI is the spark, while the 100-day moving average is the technical gateway. If the pair manages to break through that gateway following softer-than-expected inflation data, I would view it as a strong indication that the consolidation phase is coming to an end and that the path toward 1.18 is becoming increasingly realistic. On the other hand, a dollar-positive inflation surprise would put buyers back under pressure and delay that scenario. For now, what we are seeing may simply be the calm before a much larger move.
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