EUR/USD Eyes 1.1500 as Softer US Inflation Weakens the Dollar

EUR/USD extended its gains on Wednesday, climbing toward the 1.1500 level after softer-than-expected US inflation data reinforced expectations that the Federal Reserve will keep interest rates unchanged in July.

The weaker inflation outlook weighed on the US dollar, allowing the euro to recover despite disappointing Eurozone industrial production data earlier in the session.

June's softer CPI and PPI reports have strengthened market expectations that the Fed will adopt a more cautious policy stance in the coming months.

While some Fed officials continue to warn that inflation remains above target, investors have largely scaled back expectations of another near-term rate hike, putting pressure on the greenback.

The euro briefly lost momentum after Eurozone industrial production missed expectations, but the decline proved short-lived as broad-based US dollar weakness remained the dominant market driver.

Traders are now focusing on upcoming US economic data and further comments from Federal Reserve officials for fresh policy signals.

From a technical perspective, EUR/USD remains on a recovery path, with momentum improving as the Relative Strength Index (RSI) turns bullish.

The pair is now approaching the key 1.1500 psychological resistance level. A sustained break above this barrier could expose the 50-day SMA at 1.1542, followed by the 100-day SMA near 1.1592 and the 1.1600 handle.

On the downside, 1.1400 remains the first key support.

A break below this level could see EUR/USD retest 1.1377, while further weakness may open the door toward 1.1324 and the 1.1300 psychological level.

With expectations for a Fed pause continuing to support the euro, 1.1500 remains the key level to watch. A successful breakout could strengthen bullish momentum, while failure to clear resistance may trigger another round of consolidation.