Euro: Softer CPI may unlock 1.1600 against US Dollar – ING

ING economist Francesco Pesole points out that Euro/US Dollar (EUR/USD) is now primarily influenced by U.S. factors due to the lack of key Eurozone data and subdued ECB communication. A softer U.S. Consumer Price Index (CPI) could potentially push EUR/USD above the 1.1600 mark, with the 200-day moving average at 1.1630 acting as the next resistance level.

Short-term rate differentials continue to be the main driver for EUR/USD, making the Fed's narrative highly relevant. The euro is currently in a period with minimal domestic drivers, as all July data releases have been completed, and August is typically quiet for European Central Bank announcements. The ECB has already given markets a hint of a September rate hike, further influencing the currency pair.

With the U.S. CPI print being a significant factor, a softer CPI could increase the likelihood of breaking the 1.1600 level this week. The next major resistance barrier after that point is the 200-day moving average at 1.1630. Currently, short-term models from ING are not providing clear direction, as EUR/USD is largely following rate, equity, and commodity trends.

Short-term rate differentials remain the primary mover, indicating that sensitivity to the Fed's stance should remain high.