The dollar tilted lower after the US CPI data yesterday here, with headline annual inflation coming in softer than estimated. While a 25 bps rate hike next month seems to be secured, the fact that price pressures are showing signs of easing is helping to solidify the prevailing rates outlook in the coming months at least.
As things stand, Fed fund futures are pricing in a peak of around 5.01% in June before tilting lower thereafter until the end of the year. That is putting the dollar in a tough spot, especially against the backdrop of the ECB potentially staying on the more aggressive path in the months ahead.
Looking at EUR/USD, the pair is brushing against the 1.1000 mark once again today. That is a key level that helped to stall the advance earlier this year with the high back then coming in at 1.1032. If buyers can manage a daily and weekly break above 1.1000, it bodes well for the euro to look towards 1.1200 as the next target.
The 100-week moving average at 1.0947 is also one to watch, which could help buyers reaffirm the bullish momentum - if they can hold above that. The 200-week moving average is then seen at 1.1198, coinciding close to the 1.1200 level mentioned.
Meanwhile, GBP/USD is also starting to knock on the door of the 1.2500 mark once again. The level helped to stall the jump higher in the first week of April but buyers are looking poised once more.
If there is a daily/weekly break on the cards, we could see the pair run up towards 1.2800 next potentially. The 100-week moving average is currently at 1.2772 so that is perhaps a plausible first target for buyers on the way up.
As the euro strengthens, we are also seeing USD/CHF fall back below 0.9000 to its lowest levels since June 2021. There is some minor support around 0.8925-30 next but the big one to watch will be the 0.8800 mark as a breach below that level will see the pair fall to its lowest since the SNB fiasco back in 2015.
In the context of broader dollar sentiment, the charts above will be key to watch as technical breaks there could very well set off another round of weakness in the greenback this week.
