Key Insights
- EUR/USD closes near 1.0900 after hitting 1.0947, influenced by shifting Fed rate cut expectations
- ECB’s unchanged policy and geopolitical tensions add complexity to the pair’s movements
- Upcoming US GDP and PCE data crucial for determining the pair’s near-term direction
EURUSD Fundamental Analysis
The EUR/USD pair has shown resilience in recent trading, closing the week near the 1.0900 mark after touching a multi-month high of 1.0947. This price action reflects the complex interplay of central bank policies, economic data, and geopolitical factors shaping the forex landscape.
Central bank decisions continue to be the primary driver of currency movements. The week began with strong optimism for a Federal Reserve rate cut in September, putting significant pressure on the US Dollar. However, this sentiment shifted as the week progressed, with the odds of a September rate hold increasing to 1.9% by week’s end.
The European Central Bank’s latest policy announcement proved to be a non-event, maintaining current rates and reiterating its data-dependent approach. This lack of new guidance left the Euro largely unmoved, highlighting the market’s current focus on Fed policy.
Geopolitical tensions added another layer of complexity to the forex market. The Biden administration’s threat of severe restrictions on chip exports to China sparked a tech sector sell-off, indirectly supporting the dollar as a safe-haven currency. A global internet outage affecting various sectors further fueled this trend.
Economic data released during the week painted a mixed picture. US Retail Sales remained flat in June, though the core reading showed a modest improvement. In the Eurozone, inflation data confirmed a year-on-year increase of 2.5% in June, aligning with expectations.
Looking ahead, the focus shifts to key US economic releases, including Q2 GDP estimates and the PCE Price Index. These data points will be crucial in shaping expectations for the Fed’s next move. Strong GDP growth coupled with moderate inflation could challenge the current narrative of imminent rate cuts, potentially triggering a more sustained dollar rally.
EURUSD Technical Analysis
EUR/USD maintains a cautiously bullish outlook. On the weekly chart, the pair trades above its 20 and 100 Simple Moving Averages (SMAs), with the 200 SMA providing resistance around 1.1080. Momentum indicators suggest waning bullish enthusiasm, but no clear reversal signals have emerged.
The daily chart paints a similar picture, with technical indicators retreating from overbought levels but remaining in positive territory. The recent golden cross of the 20 SMA above the 100 and 200 SMAs typically signals further upside potential.
Key support for EUR/USD lies at 1.0800, a level that must hold to maintain the bullish trend. Below this, 1.0740 and 1.0660 come into focus, with the year’s low at 1.0600 serving as a major bearish target. On the upside, resistance is found at 1.0950, followed by the psychologically important 1.1000 level. A break above could see the pair testing 1.1080 and potentially 1.1140.
