The euro-dollar pair continues to trade within the 1.16 range, showing sideways movement amid mixed fundamental signals. For example, the macroeconomic reports disappointed both buyers and sellers of EUR/USD, although "on points" the buyers currently have the advantage.

On Tuesday, the U.S. CPI growth report was published. This release drew particular attention in light of the disappointing July Nonfarm Payrolls and the substantial downward revisions to previous months' employment data. Following the NFP release, dovish expectations regarding the Federal Reserve's next moves increased significantly. The dollar, accordingly, came under notable pressure.

In theory, the CPI report could have improved the situation.

However, that did not happen, even though headline inflation stayed at the previous month's level and core inflation accelerated more than expected. Such an ambiguous "mix" did not please EUR/USD sellers. That said, the pair's buyers did not become clear beneficiaries either.

According to the published data, the overall Consumer Price Index rose 2.7% y/y in July, matching June's result. The figure fell into the "red zone" as experts had expected it at 2.8%. Core CPI, excluding food and energy prices, accelerated more than anticipated: with a forecast of 3.0%, the index rose to 3.1% y/y. This is the fastest growth rate since February this year.

The report's breakdown shows that energy prices fell by 1.6% in July (gasoline, for example, dropped by 9.5%). However, prices rose for food (2.9%), housing (3.7%), transportation services (3.5%), used cars (4.8%), and new cars (0.4%).

Headline inflation remained unchanged from the previous month due to lower energy prices and the "base effect."

The main drivers of core inflation were service prices (particularly housing and insurance). For example, motor vehicle insurance jumped by 19% y/y. Airfares and medical services also contributed to the core CPI acceleration. In addition, import tariffs — especially on non-food consumer goods — have begun to impact prices (though their effect on headline inflation remains limited due to their small weight in the index).

In other words, headline inflation remained stable due to lower energy prices (with some food categories, such as meat and eggs, also cheaper), while core inflation accelerated because of rising service and real estate costs, signaling internal price pressures in the economy.

Nevertheless, the market interpreted the report against the dollar. Judging by EUR/USD's reaction, traders concluded that the data would not prevent the Fed from cutting the interest rate by 25 basis points at its next (September) meeting.

According to the CME FedWatch tool, the probability of a September rate cut has risen to 94%, compared to 89% before the CPI release. The chances of an additional rate cut at the October meeting have also increased — traders now estimate this scenario's probability at 65%. Overall, the probability of maintaining the status quo until the end of the year after a 25-bp September cut is now just 7%.

In other words, after the release, market participants became even more convinced that the Fed will cut rates twice by the end of the year. These expectations pressured the dollar, but EUR/USD is still trading within the 1.16 range.

It is noteworthy that the euro ignored the ZEW index releases, which came in the "red zone." For example, Germany's economic sentiment index fell to 34.7, while most analysts had forecast a more modest decline to 40.2. The key point here is that this was the first slowdown after three months of growth. The eurozone-wide economic sentiment index from the ZEW institute also declined more than expected — to 25.1 versus the forecast of 28.1. According to the institute's representatives, the weak result reflects the recently concluded U.S.-EU trade deal, which was met with strong disapproval in Europe's business community.

On one hand, traders interpreted the data against the greenback and in favor of EUR/USD buyers. On the other hand, buyers were unable to decisively break above the intermediate resistance level of 1.1690 (the upper line of the Bollinger Bands on the four-hour chart), meaning the pair remained within the 1.16 range.

Long positions should be considered only after buyers secure a foothold above this level — effectively, within the 1.17 range. In that case, traders would once again have a path toward the main price barrier at 1.1830, which corresponds to the upper line of the Bollinger Bands on the daily chart.