The softer than expected U.S. CPI sent EUR/USD above the three-week 1.0100/1.0300 range and forced out weak longs nL1N2ZM1U0.
But the elevated levels may present an excellent selling opportunity for those still looking for sub-parity over the coming weeks and months.
The fundamental backdrop remains bearish, even if hawkish Fed expectations are slightly scaled back.
The euro zone economy continues to face challenges that include potential energy supply disruptions nFWN2YM0I8 along with geopolitical and fragmentation risks nL4N2ZH47RnL1N2Z21AZ.
The U.S. economy, on the other hand, appears to be in a healthier state, as the U.S. labour market remains extremely strong nL1N2ZG2G3, while there is building evidence that inflationary pressures may be easing nL1N2ZL0KI.
Despite the below-forecast U.S. CPI, Fed officials were quick to point out that their inflation fight was far from over.
Minneapolis Federal Reserve Bank President Neel Kashkari on Wednesday reiterated his view that the U.S. central bank would need to raise its policy rate another 1.5 percentage points this year and more in 2023 nL1N2ZM1YK.
The EUR/USD rally was capped at the 50% retracement of the decline from May to July at 1.0369.
The 55-day moving average, which has capped rallies since June 9, is right behind at 1.0371.
Selling EUR/USD rallies with a stop-loss above 1.0375 is the favoured strategy for bears.
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