EUR/USD Bullish Flag Forms Ahead of US and European Inflation Reports

The EUR/USD pair has been trading sideways for several days and is now forming a bullish flag pattern, according to technical analysis. This development comes ahead of key economic reports from Europe and the US that could impact the currency's price.

Germany and Italy will release their July consumer inflation data on Thursday, with economists expecting the Italian headline consumer price index (CPI) to come in at 2.8%, lower than the previous month's 3.0%. In Germany, the figure is expected to move from 2.3% in June to 2.8% in July.

The upcoming US Consumer Price Index (CPI) report will also provide more color on the impact of last month's escalation between the US and Iran, with economists expecting the headline CPI to slip from 3.5% in June to 3.4% in July. Core CPI is expected to come in at 2.5%, remaining stubbornly above the 2% target of the Federal Reserve.

The EUR/USD pair jumped sharply after the recent Federal Reserve interest rate decision and after the US released the June PCE report, forming a double-bottom pattern. It has been in a consolidation phase since then. The pair is now in the process of forming a bullish flag pattern, which is a common continuation sign in technical analysis.

The 50-day moving average has also been breached, indicating a potential bullish breakout in the next few days, with the next key target to watch being at 1.1650.