EUR/USD Catches its Breath at Multi-Month Highs, The place to Subsequent?

EUR/USD PRICE FORECAST:

READ MORE: USD/CAD Forecast: 1.3000 Beckons as Greenback Index (DXY) Slide Continues

EUR/USD has been on a tear because the US CPI launch this week reaching multi-month highs across the 1.1245 mark. The transfer has largely been facilitated by greenback weak point because the Greenback Index (DXY) broke beneath the psychological 100.00 degree for the primary time since April 2022. The index is on track for its worst week since November 2022.

DISINFLATION NARRATIVE TAKES HOLD OF THE DOLLAR

It might appear that the disinflation narrative has firmly gripped the Greenback given the selloff over the previous few days. The FOMC assembly is on July 26 with the Fed presently in a blackout and never any vital information releases on the agenda forward of the assembly the Greenback might face additional promoting stress. Taking a look at CME FedWatch Device beneath we are able to see market individuals are nonetheless pricing in a 25bps hike on the July assembly.

Supply: CME FedWatch Device

I for one do count on the Federal Reserve to proceed with its mountain climbing cycle on July 26 with any shock more likely to be concerning the dimension of stated hike. Fed Chair Powell in testimony earlier than Congress said that because the Fed nears their objective, pauses and a possible slowdown within the dimension of hikes could also be wanted. Market individuals appear to consider that the Fed won’t increase past the July assembly whereas the Greenback is more likely to be extraordinarily delicate towards lackluster information out of the US. Any indicators of a slowdown within the US economic system may very well be interpreted by market individuals as an indication that the Fed might be able to lower charge prior to anticipated which might additional weigh on the greenback.

Discuss has now pivoted to a possible ‘comfortable touchdown’, a phrase which had irked market individuals for a very long time. Attention-grabbing occasions forward for the US Greenback and naturally markets as a complete as we head towards the July FOMC assembly and past.

RISK EVENTS AHEAD

At the moment we do have the preliminary Michigan Client Sentiment launch which might stoke some volatility across the greenback. Waiting for subsequent week and we solely have US retail gross sales and preliminary constructing allow information on the docket, neither of that are more likely to alter the US {Dollars} outlook in the meanwhile. It appears the Greenback Index may very well be in for a bumpy trip forward of the FOMC assembly.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

Taking a look at EURUSD from a technical perspective and we’re buying and selling at ranges final se in February 2022.The greenback is staging a small come again as we speak up round 0.20% on the time of writing. We’ve seen a slight pullback from the highs in EURUSD because the US session approaches.

The RSI is in overbought territory, hinting at a possible retracement with the 1.1200 more likely to be key. The each day and weekly candle shut can be of explicit curiosity as a detailed above 1.1200 could embolden bulls as the brand new week kicks off. The MAs on the weekly are establishing for a golden cross sample as effectively which doesn’t bode effectively for a possible retracement. Technicals are flashing some blended alerts nonetheless the age-old adage of ‘the development is your good friend’ has by no means been more true. Attempting to choose a prime at this stage is a reasonably silly endeavor with the sensible play being a pullback to permit potential bulls a chance to become involved.

EUR/USD Each day Chart – July 14, 2023

Supply: TradingView

Key Ranges to Hold an Eye On

Help Ranges

Resistance Ranges

IG CLIENT SENTIMENT DATA

IGCSshows retail merchants are presently SHORT on EURUSD, with 76% of merchants presently holding SHORT positions. At DailyFX we usually take a contrarian view to crowd sentiment, and the truth that merchants are brief means that EURUSD could take pleasure in a brief pullback earlier than persevering with to greater towards the 1.1400 deal with.

Written by: Zain Vawda, Market Author for DailyFX.com

Contact and observe Zain on Twitter: @zvawda