The Euro (EUR) rallied against the US Dollar (USD) to a fresh monthly high near 1.0870 in Wednesday’s trading session. This surge comes after the release of dovish US economic data, including softer-than-expected inflation (CPI) and stagnant Retail Sales figures for April.
Key Drivers:
- Weaker US Inflation: The CPI data aligned with estimates, indicating a continuation of disinflation in the US economy.
- Disappointing Retail Sales: Retail Sales data showed no growth in April, further dampening economic prospects.
- Weakening Dollar: The US Dollar Index (DXY) tumbled to a one-month low as the data fueled expectations of a dovish Federal Reserve (Fed).
Technical Outlook: Breakout Potential for EUR/USD
- Monthly High: EUR/USD reached a fresh monthly high near 1.0870.
- Symmetrical Triangle Breakout: The pair surpassed the key resistance level of 1.0800 and is approaching the upper border of a Symmetrical Triangle pattern formed on the daily chart.
- Momentum Indicators: The 14-period Relative Strength Index (RSI) climbed to 60.00, suggesting bullish momentum. A sustained rise above this level could indicate further Euro gains.
A Turning Point for EUR/USD?
The current price action suggests a potential breakout for EUR/USD from the Symmetrical Triangle. This could signal a period of Euro dominance if confirmed. However, a sharp reversal could see the pair retreat towards the lower trendline of the triangle.