Investors swiftly unwound their long positions on the dollar this week, driven by compelling signs of disinflation in the US in June. Market expectations regarding the Federal Reserve's (Fed) policy for the remainder of the year have also changed significantly. The baseline scenario now anticipates only one rate hike instead of two, and the market hopes to receive confirmation of these expectations at the July Fed meeting. Against this backdrop, it is challenging to find a strong counterargument that could put the floor under the dollar price. However, from a technical analysis perspective, the correction in the American currency appears excessive both in terms of duration and scale (over 3% since last Thursday). Consequently, the risk of a minor upward rebound is increasing for the coming week.

As for EURUSD, there are specific conditions that could facilitate a pullback in the following week. The price has strongly reached the bullish target I mentioned earlier, around the 1.1250 area:

It would be desirable to observe a correction towards the 1.11-1.1150 range before considering a move towards the long-term resistance trendline near the 1.15 level:

Both the markets and the Fed received a welcomed signal regarding core consumer inflation this week. In June, it slowed from 5.3% to 4.8% (forecast was 5%). Naturally, amid positive labor market indicators and leading indicators (such as services PMI, etc.), the market increased the chances of a "soft landing" for the US economy after a period of high inflation fueled by pandemic-related stimulus. The reduction in uncertainty associated with the risk of high inflation allowed risk assets to reach new local highs. Yesterday, the S&P 500 surpassed the 4500-point mark for the first time since mid-April last year. However, a correction is also looming for the key US equity index as the price has reached the upper bound of the major bullish channel: