EUR/USD Price Analysis: Rallies to near 1.0780 amid cheerful market mood, ECB-Fed policy in focus

• EUR/USD has shown a perpendicular recovery to near 1.0784 as investors have underpinned the risk appetite theme.
• US headline CPI is seen softening due to lower oil prices while core inflation is expected to remain persistent.
• EUR/USD had strongly rebounded after sensing buying interest near the 61.8% Fibonacci retracement at 1.0738.

The EUR/USD pair has displayed a vertical recovery from 1.0740 in the European session. The major currency pair has shifted into a bullish trajectory as the market mood has turned cheerful on hopes that the Federal Reserve (Fed) could postpone an interest rate hike for July monetary policy meeting.

S&P500 futures have added significant gains in the London session amid a solid appeal for the risk-sensitive assets. Before the Fed’s policy decision, United States inflation data will be keenly watched. Headline Consumer Price Index (CPI) is seen softening due to lower oil prices while core inflation is expected to remain persistent.

Also, investors are awaiting the interest rate decision by the European Central Bank (ECB), which will be announced on Thursday. ECB President Christine Lagarde is expected to raise interest rates further by 25 basis points (bps) to 4%.

EUR/USD had strongly rebounded after sensing buying interest near the 61.8% Fibonacci retracement (plotted from March 15 low at 1.0516 to April 26 high at 1.1095) at 1.0738.

A bull cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at 1.0725, adds to the upside filters.

The Relative Strength Index (RSI) (14) is attempting to shift into the bullish range of 60.00-80.00. An occurrence of the same will be followed by an upside momentum.

A confident move above June 08 high at 1.0787 will drive the shared currency pair toward May 22 high at 1.0831, followed by the 38.2% Fibo retracement at 1.0874.

In an alternate scenario, the downside move will resume if the shared currency pair drops below the June 05 low at 1.0675. This will drag the asset towards May 31 low at 1.0635 followed by March 03 low at 1.0588.

EUR/USD four-hour chart