Eurozone inflation cooling coupled with a strong dollar led to continued consolidation of EUR/USD at low levels.
2026-07-01 16:13:50
The euro/dollar pair weakened during Wednesday's European trading session, falling back to around 1.1390 , continuing its pullback after consolidating sideways in the previous session. Current market sentiment is primarily influenced by the dual pressures of slowing inflation in the Eurozone and a stronger dollar; the short-term structure is weak but has not yet formed a trend breakout.
From a Eurozone fundamentals perspective, the faster-than-expected cooling of inflation is the core factor suppressing the euro. Market surveys show that Germany's June Consumer Price Index (CPI) fell to 2.3% year-on-year, lower than May's 2.6% and below market expectations of 2.5%. The simultaneous decline in inflation in major economies such as France and Italy has reduced market expectations that the European Central Bank will need to maintain high interest rates further.
Against this backdrop, the expectation of a euro interest rate advantage has weakened, the attractiveness of euro assets has declined, and the exchange rate continues to be under pressure. The market is awaiting the preliminary HICP data for the Eurozone to further confirm whether the pace of inflation decline is sustainable.
Meanwhile, the US dollar remained relatively strong, becoming another key factor suppressing the EUR/USD exchange rate. Increased uncertainty surrounding the US-Iran Doha negotiations fueled safe-haven demand, supporting the dollar's performance. At the same time, expectations for a hawkish Federal Reserve policy path remained high; according to the CME FedWatch tool, the market's probability of a September rate hike rose to approximately 67% , reinforcing the dollar's interest rate advantage.
In addition, speeches by Federal Reserve officials at the European Central Bank's Sintra Forum, as well as ADP employment data and ISM manufacturing PMI, will be key catalysts for the day, followed by non-farm payroll data which will further determine the short-term direction of the US dollar.
Overall, EUR/USD is currently under the dual pressure of "weakening euro interest rate expectations + strengthening dollar interest rate differential advantage", and is expected to remain weak and volatile in the short term.
From a daily chart perspective, EUR/USD has been declining after encountering resistance in the 1.15 area, and is currently trading below the short-term moving averages. The overall trend has gradually shifted from high-level consolidation to a weaker, more bearish structure. The price has repeatedly encountered resistance near 1.1450 , indicating significant selling pressure above. The key support level is currently at 1.1360 ; a break below this level could open up further downside potential towards the 1.13 area.
From a 4-hour chart perspective, the exchange rate is moving along a descending channel, with limited rebound strength. The short-term moving average system remains in a bearish alignment, indicating that the bearish structure is dominant. Momentum indicators remain neutral to weak, and the market is clearly awaiting macroeconomic data to drive the price. If the US employment data is stronger than expected, the exchange rate may fall further; if the data is weaker than expected, it may trigger a technical rebound to around 1.1450.
Editor's Summary : The core contradiction in the current EUR/USD exchange rate movement remains the divergence between "rapidly cooling inflation in the Eurozone leading to easing expectations for ECB policy" and "high US interest rates strengthening the dollar's advantage." In the short term, the dollar is favored by both safe-haven demand and interest rate differentials, while the euro has lost policy support due to declining inflation. The market is entering a crucial data window, with HICP and US employment data being key triggers for short-term direction. Before the data release, the exchange rate is expected to maintain a weak and volatile pattern, while the medium-term trend will still depend on the differences in monetary policy paths between Europe and the US.
From a Eurozone fundamentals perspective, the faster-than-expected cooling of inflation is the core factor suppressing the euro. Market surveys show that Germany's June Consumer Price Index (CPI) fell to 2.3% year-on-year, lower than May's 2.6% and below market expectations of 2.5%. The simultaneous decline in inflation in major economies such as France and Italy has reduced market expectations that the European Central Bank will need to maintain high interest rates further.
Against this backdrop, the expectation of a euro interest rate advantage has weakened, the attractiveness of euro assets has declined, and the exchange rate continues to be under pressure. The market is awaiting the preliminary HICP data for the Eurozone to further confirm whether the pace of inflation decline is sustainable.
Meanwhile, the US dollar remained relatively strong, becoming another key factor suppressing the EUR/USD exchange rate. Increased uncertainty surrounding the US-Iran Doha negotiations fueled safe-haven demand, supporting the dollar's performance. At the same time, expectations for a hawkish Federal Reserve policy path remained high; according to the CME FedWatch tool, the market's probability of a September rate hike rose to approximately 67% , reinforcing the dollar's interest rate advantage.
In addition, speeches by Federal Reserve officials at the European Central Bank's Sintra Forum, as well as ADP employment data and ISM manufacturing PMI, will be key catalysts for the day, followed by non-farm payroll data which will further determine the short-term direction of the US dollar.
Overall, EUR/USD is currently under the dual pressure of "weakening euro interest rate expectations + strengthening dollar interest rate differential advantage", and is expected to remain weak and volatile in the short term.
From a daily chart perspective, EUR/USD has been declining after encountering resistance in the 1.15 area, and is currently trading below the short-term moving averages. The overall trend has gradually shifted from high-level consolidation to a weaker, more bearish structure. The price has repeatedly encountered resistance near 1.1450 , indicating significant selling pressure above. The key support level is currently at 1.1360 ; a break below this level could open up further downside potential towards the 1.13 area.
From a 4-hour chart perspective, the exchange rate is moving along a descending channel, with limited rebound strength. The short-term moving average system remains in a bearish alignment, indicating that the bearish structure is dominant. Momentum indicators remain neutral to weak, and the market is clearly awaiting macroeconomic data to drive the price. If the US employment data is stronger than expected, the exchange rate may fall further; if the data is weaker than expected, it may trigger a technical rebound to around 1.1450.
Editor's Summary : The core contradiction in the current EUR/USD exchange rate movement remains the divergence between "rapidly cooling inflation in the Eurozone leading to easing expectations for ECB policy" and "high US interest rates strengthening the dollar's advantage." In the short term, the dollar is favored by both safe-haven demand and interest rate differentials, while the euro has lost policy support due to declining inflation. The market is entering a crucial data window, with HICP and US employment data being key triggers for short-term direction. Before the data release, the exchange rate is expected to maintain a weak and volatile pattern, while the medium-term trend will still depend on the differences in monetary policy paths between Europe and the US.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
