The euro-dollar pair is testing the resistance level of 1.1470 for the second consecutive day (the upper line of the Bollinger Bands indicator coinciding with the Kijun-sen line on the D1 timeframe) against the backdrop of a general weakening of the American currency. The dollar index has fallen to the base of the 100 figure following the publication of weak reports on CPI and PPI growth in the U.S. Almost all components of the releases came out in the "red zone," reflecting a slowdown in inflation.

However, the primary influence on the dollar was not so much the inflation reports themselves, but their impact on market expectations regarding further actions by the Federal Reserve. Weak data bolstered traders' confidence that the central bank would maintain a wait-and-see stance, significantly reducing the likelihood of a more aggressive monetary policy, at least in the foreseeable future. According to CME FedWatch data, the probability of an interest rate hike at the July meeting has decreased to 9%, while before the publication of the CPI and PPI, this probability was 30-35%. The chances of a rate cut in September are now estimated to be 50/50, whereas just last week, there was almost a 70% probability of such a scenario.

Again, this notable revision in market expectations was due not only to the publication of the aforementioned reports but also to the latest statements from Fed representatives, whose rhetoric proved less hawkish than many market participants had anticipated.

Thus, the key event of the week was the two-day hearings of Fed Chair Kevin Warsh in Congress. His rhetoric also softened slightly, although it is still too early to speak of a "dovish pivot."

Nonetheless, during his appearances before the House of Representatives and the Senate, Warsh no longer focused solely on the risks of accelerating inflation. After the publication of June's CPI, he acknowledged that the latest data looks "encouraging." Despite the caveat that one report is not sufficient to change the assessment of the situation, the mere fact that such formulations have emerged is quite notable in light of his previously emphasized hawkish rhetoric.

Secondly, following the publication of the PPI (the next day), Kevin Warsh made a very telling statement, referring to the latest inflation reports as "imperfect one-off measurements." This effectively indicated that the Fed does not intend to draw conclusions based on one or two publications and automatically adjust its monetary policy. This nuance is particularly important in the context of upcoming inflation reports. The rise in oil prices in July could prompt a temporary acceleration in the overall CPI; however, Warsh's words suggest that the Fed will not view such a spike as sufficient grounds for tightening monetary policy. Judging by his rhetoric, the central bank does not intend to react sharply to either isolated signs of weakening inflation or its temporary acceleration, preferring to assess the sustainability of the trend based on a comprehensive set of incoming data.

Furthermore, Kevin Warsh again refrained from providing any signals regarding the future trajectory of monetary policy. However, such "silence" now carries a somewhat different connotation: if a week ago traders feared that the lack of signals indicated the central bank's readiness to raise rates, then after the CPI and PPI, this position is more likely to reflect a desire to maintain the current policy without additional tightening.

Moreover, not only has Warsh softened his rhetoric, but so have other Fed representatives who expressed their positions this week. In particular, New York Fed President John Williams stated that the current monetary policy is, in his view, "already in a sufficiently restrictive zone." Thus, Williams (who is one of the most influential Fed officials) effectively asserted that the current level of interest rates already meets the set goals. Additionally, he highlighted several factors that could continue to cool inflation, including slowing wage growth, easing rental pressures, reduced tariff impacts, and a potential stabilization of the oil market.

The head of the Chicago Fed, Austan Goolsbee, has also noticeably softened his rhetoric. Just a few weeks ago, he primarily focused on the risks of renewed acceleration in inflation. This week, however, he discussed not the likelihood of a new price spike but rather the need to obtain a few more weak reports to ensure the sustainability of the disinflation process. This framing of the issue appears less "hawkish."

All these fundamental signals contribute to the further growth of EUR/USD. However, it is premature to talk about the formation of a sustainable upward trend, as the currency market is still influenced by geopolitical factors. To date, EUR/USD buyers have distanced themselves from geopolitics, but the uncertainty regarding the further development of a new escalation in the Middle East could change the balance of power at any moment, as an escalation of the conflict could support the dollar due to its status as a safe-haven asset.

According to The Wall Street Journal, Donald Trump is currently considering the possibility of expanding military operations against Iran. Among the scenarios being discussed in the White House are strikes on energy infrastructure and even the deployment of ground troops to capture islands in the Strait of Hormuz (including Halq Island, which serves as the main logistics hub for Iranian oil exports). Experts interviewed by WSJ state that if Trump approves these actions, "the most dangerous phase of the conflict will begin for the United States."

Given these risks, it is advisable to consider long positions only after EUR/USD buyers not only exceed but also consolidate above the resistance level of 1.1470 (the upper line of the Bollinger Bands indicator coinciding with the Kijun-sen line on the D1 timeframe). The next target for the upward movement is the mark of 1.1560, which corresponds to the middle line of the Bollinger Bands on the W1 timeframe.