EUR/USD Drops from Supply Zone, Eyes 1.0900 Amid Inflation..

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Following our previous analysis of the EUR/USD pair, we observed that the price reacted strongly to our identified supply area, leading to a notable decline. Currently, the price is approaching our first take-profit target, and there is potential for further depreciation towards the 1.0900 level. This movement aligns with the positioning of retail traders, who remain bullish according to the latest Commitment of Traders (COT) report—a sentiment that often precedes a market reversal, as we've seen in this case.

The economic backdrop further supports this bearish outlook. The recent Personal Consumption Expenditures (PCE) report indicated that core inflation on a year-over-year basis rose by 2.6%, which, while steady, was slightly below the forecasted 2.7%. On a month-to-month basis, inflation met expectations with a 0.2% increase, consistent with previous releases. Despite these figures, the market continues to anticipate that the Federal Reserve will begin reducing interest rates starting from the September meeting. However, the persistence of inflationary pressures has tempered expectations for a swift pivot towards policy normalization.

Given these factors, we anticipate a continuation of the bearish trend in EUR/USD, with the possibility of the price moving lower in the coming sessions.

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