EUR/USD strengthens beyond mid-1.1200s, highest since February 2022 on weaker USD

• EUR/USD climbs to a fresh YTD top and draws support from renewed USD selling bias.
• Bets that the Fed will soon end its rate-hiking cycle continues to weigh on the Greenback.
• Expectations for more rate hikes by the ECB underpin the Euro and also act as a tailwind.

The EUR/USD pair regains positive traction after the range-bound price action witnessed over the past two days and climbs to its highest level since February 2022, around the 1.1255 region during the Asian session on Tuesday.

The US Dollar (USD) comes under some selling pressure and drifts back closer to a 15-month low touched last Friday in the wake of the likelihood that the Federal Reserve (Fed) is nearing the end of its policy tightening campaign. The bets were reaffirmed by a further moderation in the US consumer prices and justifies the recent slide in the US Treasury bond yields. This, along with a positive risk tone, weighs on the safe-haven Greenback, which, in turn, is seen as a key factor acting as a tailwind for the EUR/USD pair.

The shared currency, on the other hand, remains well supported by firming expectations for additional interest rate hikes by the European Central Bank (ECB) beyond July. In fact, the minutes of the June ECB meeting released last Thursday showed that the Governing Council is determined to continue the current hiking cycle to curb stubbornly high inflation, which is anticipated to stay above the 2% target through the end of 2025. This, to a larger extent, helps offset signs of a cooling economy and favours the EUR/USD bulls.

Market participants now look forward to the latest economic forecasts by the European Commission for a fresh impetus. Later during the early North American session, traders will take cues from the release of Retail Sales and Industrial Production figures from the US. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide some impetus to the EUR/USD pair. The aforementioned fundamental backdrop, meanwhile, suggests that the path of least resistance for spot prices is to the upside.

Technical levels to watch