EUR/USD Stays Bullish Amid Mixed US Inflation Signals and Fed Rate Cut Expectations

EUR/USD trades flat ahead of the Fed's monetary policy this week. It hit an intraday high of 1.17389 and is currently trading around 1.1261. Overall trend remains bullish as long as support 1.1575 holds. 

The US inflation data released last week sent conflicting messages; the Producer Price Index (PPI) on September 10 unexpectedly dropped 0.1% month-over-month, missing the predicted 0.3% increase. Driven by constricted trade margins and modest commodity cost increases, core PPI also dropped 0.1% against expectations of a 0.3% rise. Conversely, the Consumer Price Index (CPI) on September 11 showed a year-over-year rise of 2.9%, somewhat higher than the 2.7% from July and in line with expectations, fueled by price increases in shelter and goods. Core CPI is unchanged at 3.1%. These conflicting outcomes strengthened expectations for a September Federal Reserve rate reduction since lower PPI figures indicated slowing producer inflation, while sticky core CPI showed stubbornness. Though the Fed seemed more interested in resolving labor market issues, it pointed out ongoing consumer price pressures.

The pair is holding above the 55 EMA, 200 EMA, and 365 EMA in the 4-hour chart. Near-term resistance is seen at 1.1740; a break above this may push the pair to targets of 1.1780/1.1800/1.1835/1.1900. On the downside, support is seen at 1.1700; any violation below will drag the pair to 1.1660/1.15750/1.1545/1.1480/1.1435.

Market Indicators and Trading Strategy

Commodity Channel Index (CCI)-  Bullish

Average Directional Movement Index (ADX) - Neutral

 It is good to buy on dips around 1.1700 with a stop-loss at 1.1660 for a target price of 1.1835.