EUR/USD Retains its Bullish Bias after its Best Week of the Year
EUR/USD Analysis
The common currency runs another profitable month, coming from its best week of the year, which was sparked by the soft CPI report form the United States. Headline inflation decelerated sharply in June and the stickier core showed significant moderation as well.
Markets still expect a quarter percentage point hike by the Fed on July 26, but they view this as one-and-done. More to it, their attention has now shifted to the timing of the first cut, which they expect as early as January, according to CME's FedWatchTool at the time of writing [1]. The ECB is also set to raise rates again and has more work to do on the inflation front.
EUR/USD clinches new 2023 highs today and brings 1.1495 in the spotlight, but bulls will need fresh impetus to challenge it.
Despite the clear bullish bias, the pair loses steam this week, while the Relative Strength Index (RSI) diverges lower, after reaching the most overbought levels in years. This could lead to a pullback to the former resistance now turned support at 1.1096. However, the downside is well protected and a test of the EMA200 (1.0960) will require strong catalyst.
Markets are optimistic about the end of hikes after July and cuts not long after that, but they have been disappointed before. The labor market remains tight and the economy continues to beat expectation, supporting the higher-for-longer narrative. Furthermore. The Fed's latest projections implay an additional 50 bps of hikes this year.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 02 Dec 2023 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html |
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