EUR/USD hits over two-month top, around 1.1030 area as USD selling remains unabated

• EUR/USD climbs to over a two-month high and draws support from sustained USD selling.
• Speculations that the Fed is nearing the end of its rate-hiking cycle undermine the Greenback.
• Bets for additional rate hikes by the ECB benefit the Euro and remain supportive of the move.

The EUR/USD pair trades with a positive bias for the fifth successive day on Wednesday and climbs to the 1.1030 region, or its highest level since May 8 during the Asian session.

The momentum is sponsored by the prevailing selling bias surrounding the US Dollar (USD), which is seen prolonging its recent downtrend witnessed over the past week or so and dropping to a fresh two-month low. Several Federal Reserve (Fed) officials said on Monday the US central bank will likely need to raise interest rates further to bring down inflation, though indicated that the end of the current monetary policy tightening cycle is getting close. This leads to a further decline in the US Treasury bond yields and continues to weigh on the buck. Apart from this, a generally positive risk tone further undermines the safe-haven Greenback and lends support to the EUR/USD pair.

Bullish traders, meanwhile, seem rather unaffected by Tuesday's disappointing release of the German ZEW Economic Sentiment Index, which fell to -14.7 in July from -8.7 in the previous month and missed expectations. This, however, was largely offset by German consumer inflation figures, which confirmed the rebound in June after three months of moderation. In fact, the German CPI was finalized to show a 0.3% rise on a monthly basis and 6.4% over the last twelve months, up from the previous month's reading of 0.1% and 5.4% respectively.

The data reinforces the likelihood of additional interest rate hikes by the European Central Bank (ECB), which, in turn, is seen as another factor acting as a tailwind for the shared currency. It will now be interesting to see if the EUR/USD pair can capitalize on its recent rally from the vicinity of the 100-day Simple Moving Average (SMA) support or if bulls opt to lighten their bets ahead of the US consumer inflation figures. The key US CPI report is due for release later during the early North American session and influence the near-term USD price dynamics.

Technical levels to watch