Key Points: -
- The EUR/USD pair is edging lower, trading near its weekly low after experiencing declines over the last two consecutive days.
- The bearish bias is gaining acceptance, supported by a stronger US Dollar and reduced enthusiasm for a hawkish stance from the European Central Bank (ECB).
- ECB's Stournaras emphasizes the easing Eurozone inflation and criticizes the adoption of a more restrictive policy approach.
- Eurozone Consumer Confidence, US Initial Jobless Claims, and housing data will play a crucial role in providing fresh impetus to the market.
Today's Scenario: -
The EUR/USD pair is trading lower around 1.1200, retracing from the previous day's bounce off the weekly low. This decline comes amid doubts about the European Central Bank's (ECB) hawkish moves due to inflation concerns. The US Dollar is also showing strength, contributing to the bearish sentiment in the Euro pair after a two-day downtrend from the 17-month high.
While the final readings of the Eurozone Core inflation for June improved on a monthly basis, ECB Governing Council member Yannis Stournaras expressed uncertainty about further rate hikes after the expected 25 basis points increase next week. Stournaras also expressed concerns about falling inflation and the potential negative impact of further interest rate increases on the economy.
Despite downbeat US housing data, the US Dollar Index (DXY) has risen in the last two days, reaching the weekly top around 100.55. The rise is driven by market sentiment that the Federal Reserve (Fed) may keep interest hikes high for a period following the rate hike in July.
The US Retail Sales for June showed slower growth, but some promising details supported the Fed's stance of keeping rates higher for a longer duration, which also helped in confirming the expected 0.25% rate hike in July. This led to a corrective bounce for the US Dollar, defending its recovery from the 15-month low on Tuesday, despite the downbeat US housing data.
The hopes of stronger earnings from US banks due to higher rates, along with mixed concerns about US-China relations, have led Wall Street to edge higher while weighing on US Treasury bond yields.
Upcoming economic data includes the preliminary readings for Eurozone's Consumer Confidence for July and the US Initial Jobless Claims and Existing Home Sales. However, the focus should mainly be on risk factors for clearer market directions.
Diagram of EUR/USD: -
Economic Events: -
Buy Scenario: -
From a technical perspective, the recent breakdown through a three-week-old trading range and the 100-hour Simple Moving Average (SMA) suggest caution before considering new bullish positions in the EUR/USD pair. For a further intraday upward move, it would be important to see continued buying above the 1.1245-1.1250 region. If this occurs, spot prices could climb back to test the multi-month peak around 1.1275 and potentially aim for the 1.1300 mark. Further upside momentum could lead to the 1.1335 resistance, followed by the 1.1400 round figure, till we do not advise to buy EUR/USD currency pair.
Sell Scenario: -
On the downside, if the pair weakens below the 1.1200 mark, initial support may be found near the overnight swing low around 1.1175-1.1170. The next significant support is situated near the 1.1145 zone. A break below this level could potentially extend the downward trajectory, pushing the EUR/USD pair towards the 1.1100 round figure. However, the 1.1100 level is expected to act as strong support, and a decisive break below it would negate the near-term positive outlook and open the way for a deeper corrective decline. Till then we do not advise selling EUR/USD.
Support and Resistance Level: -
S1 1.1170 - R1 1.1236
S2 1.1139 - R2 1.1271
S3 1.1104 - R3 1.1302