EUR/USD Price Analysis: Eyes descending trend-channel breakout ahead of US CPI

• EUR/USD steadily climbs back to over a two-week high touched on Wednesday amid a softer USD.
• Expectations that the Fed is nearing the end of its rate-hiking cycle continue to undermine the buck.
• Bulls now seem reluctant and keenly await the release of the US CPI report before placing fresh bets.

The EUR/USD pair trades with a mild positive bias through the Asian session on Thursday and is currently placed near the 1.0630 region, or a two-and-half-week peak touched the previous day.

The US Dollar (USD) remains on the defensive in the wake of reduced bets for more interest rate hikes by the Federal Reserve (Fed). Apart from this, a positive risk tone contributes to the weaker sentiment surrounding the safe-haven buck, which, in turn, is seen acting as a tailwind for the EUR/USD pair. Traders, however, seem reluctant to place aggressive bets and prefer to wait on the sideline ahead of the latest US consumer inflation figures, which might influence expectations about the Fed's future rate-hike path and provide a fresh directional impetus.

From a technical perspective, the 1.0630-1.0635 area represents the top boundary of a downward-sloping channel extending from a 17-month peak touched in June. This is closely followed by the 23.6% Fibonacci retracement level of the July-October steep decline to the lowest level since December 2022. A sustained strength beyond will suggest that the EUR/USD pair has formed a short-term bottom and pave the way for an extension of the recent recovery move from the 1.0450-1.0445 region, or the YTD low, witnessed over the past two weeks or so.

Given that oscillators on the daily chart have just started gaining positive traction, the EUR/USD pair might then aim to reclaim the 1.0700 round-figure mark for the first time since September 20. The momentum could get extended further towards testing the 50-day Simple Moving Average (SMA), currently around the 1.0740 region, en route to the next relevant hurdle near the 1.0765 region, or the 38.2% Fibo. level. The latter should cap the upside amid speculations that further rate hikes by the European Central Bank (ECB) may be off the table for now.

On the flip side, the 1.0600 round figure now seems to act as an immediate support ahead of the 1.0565 horizontal zone. This is followed by the weekly low, around the 1.0520 area set on Monday in reaction to an unprecedented attack by the Hamas militant group in Gaza on Israel over the weekend. A convincing break below the latter might shift the bias back in favour of bearish traders and drag the EUR/USD pair further below the 1.0500 psychological mark, towards retesting the YTD trough, around the 1.0450-1.0445 region.

EUR/USD daily chart

Technical levels to watch