The upcoming trading week will be dominated by U.S. inflation data. We will learn the July readings of key inflation indicators, which have the potential to trigger strong volatility in dollar pairs, including EUR/USD.
By the end of the week, the probability of a Federal Reserve interest rate cut in September will either rise to 90–95% or decrease again if inflation accelerates more than expected. The euro will also respond to its fundamental factors, including ZEW indices and eurozone economic growth data.
Monday
Monday's economic calendar is almost empty, meaning the pair will trade on the momentum of Friday's session.
The only item of mild (mostly academic) interest is China's yuan loan data, which reflects the total value of new loans issued by Chinese banks in the national currency for the month, in this case, July. This is one of the indicators of credit activity in China. The report could indirectly affect EUR/USD if it shows a significant increase in loans, as this would indicate a rise in Chinese economic activity. Such a development could spark interest in risk assets, including the euro — and vice versa. According to preliminary forecasts, bank loans in July are expected to total 200 billion yuan, compared with a surge of 2.24 trillion in June. Therefore, if the figure exceeds 200 billion (and especially if it surpasses June's result), EUR/USD buyers may find support from a stronger euro.
Also on Monday, Italy's final inflation data will be released, though this is unlikely to have any impact on EUR/USD.
Tuesday
Probably the most important day of the week for EUR/USD traders.
During the European session, Germany will publish ZEW institute indices assessing the current situation and reflecting the expectations of 350 institutional investors and analysts regarding the country's economic outlook.
Forecasts suggest that the German economic sentiment index will fall in August to 39.7 points, after three consecutive months of growth (in July it reached 52.7, the highest since February 2022). Such a reading would indicate a noticeable weakening of business optimism and could put pressure on the euro — especially amid speculation over whether the European Central Bank has ended its current easing cycle or might cut rates again before year-end.
The eurozone-wide ZEW business sentiment index is also expected to decline, from 36.1 to 28.1.
However, the most important release on Tuesday (and the week) will come at the start of the U.S. session — the July U.S. CPI. This is one of the Fed's key inflation benchmarks for interest rate decisions. Headline CPI is forecast to accelerate to 2.8% y/y after rising to 2.7% the previous month. If the figure meets or exceeds the forecast, it would mark the third consecutive monthly increase, suggesting an upward trend.
Core CPI, excluding food and energy, is also expected to show faster inflation. For three months (March through May), it stood at 2.8%, rising to 2.9% in June. In July, it is forecast to rise again — this time to 3.0%.
Currently, CME FedWatch data shows an 89% probability of a Fed rate cut in September. If the CPI comes in at or above forecast, the dollar could get strong support as dovish expectations ease — especially given Jerome Powell's July statement that September's decision will depend on fresh inflation and labor market data. While the labor market (via July NFP) fueled dovish sentiment, CPI could cast doubt on a near-term cut.
Wednesday
Germany's final July inflation data will be released, expected to match preliminary readings: headline CPI at 2.0% y/y and harmonized CPI at 1.8% y/y. If the report meets expectations, markets will likely ignore it.
Also, on Wednesday, Atlanta Fed President Raphael Bostic will speak. Last week, he struck a dovish tone, noting that labor market data revisions "suggest the U.S. economy's slowdown is more substantial." However, since his speech will come after the CPI release, his stance could harden if the data show faster inflation, especially above forecasts.
Thursday
During the European session, the second estimate of Q2 eurozone GDP will be published. The initial reading showed the economy grew 0.1% q/q and 1.4% y/y. Forecasts suggest no revision. If confirmed, the release will pass quietly; if revised, EUR/USD will likely react given ongoing debates over ECB policy.
During the U.S. session, initial jobless claims will be released. The figure has risen for two straight weeks after a six-week decline. Last week it climbed to 226,000. While anything below 250,000 is considered "normal," the trend is important. Forecasts call for 220,000 this week, but a reading above 226,000 could pressure the dollar by confirming the upward trend.
Also, on Thursday, the U.S. will release PPI inflation data. In June, PPI unexpectedly slowed (in contrast to CPI), but a rebound is expected in July. Headline PPI is forecast to accelerate to 2.5% y/y (from 2.3%), and core PPI to 2.7% y/y (from 2.6%). PPI may either reinforce CPI's message or counter it, as happened last month.
Friday
The last trading day of the week starts with Chinese data. Industrial production is forecast to rise 6.0% y/y in July after a 6.8% increase in June. Fixed asset investment is expected to grow 2.7% (after 2.8%), and retail sales 4.6% (after 4.8%). This points to moderate growth, slower than last month. If the figures exceed forecasts, risk appetite could increase, supporting EUR/USD buyers.
During the U.S. session, July retail sales data will be released. Total retail sales are forecast to rise 0.5% (after 0.6% in June), and sales ex-autos by 0.3% (after 0.5%). For dollar bulls, these must remain in positive territory.
Also in the U.S., industrial production data will be published. Preliminary forecasts suggest a neutral outcome for the dollar: output is expected to be flat in July after a weak 0.3% gain in June. The NY Fed's Empire Manufacturing index is forecast to return to negative territory at -1.1, after rising to 5.5 last month.
Another key indicator is the University of Michigan Consumer Sentiment Index — an important leading gauge of future spending. It is expected to rise slightly to 62.1 (from 61.7 in June). If it meets or beats forecasts, it would mark a third straight monthly increase, confirming an upward trend.
Conclusions
Preliminary forecasts suggest support for the dollar — mainly from an expected acceleration in CPI and PPI, which would reduce dovish Fed expectations. However, if inflation reports come in weaker than expected, this could work against the U.S. currency. Other macro releases will play more of a supporting role.
From a technical perspective, long positions remain favored. On the D1 timeframe, the price is between the middle and upper Bollinger Bands lines and above all Ichimoku lines. The W1 chart shows a similar picture, with Ichimoku forming a bullish "Parade of Lines" signal. The nearest upside target is 1.1700, which corresponds to the upper Bollinger Band on the H4 chart.
