Encouraging European news boost the EUR

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EUR/USD Current Price: 1.0227

  • The ECB may discuss a 50 bps rate hike amid continued inflationary pressures.
  • Global stocks soared, with Wall Street trading at fresh one-month highs.
  • EUR/USD is losing bullish momentum in the near term but holding above 1.0200.

The EUR/USD pair hovers in the 1.0220 price zone after reaching an intraday high of 1.0268. Speculation that the European Central Bank could become less conservative and other positive news affecting the Euro area boosted the common currency, as the dollar remained on the backfoot.

Market talks suggested that ECB members could discuss a rate hike worth 25 bps or 50 bps at their upcoming meeting. Also, the EU has announced it would soften sanctions on Russian banks to allow food trade “after having determined that such funds or economic resources are necessary for the purchase, import or transport of agricultural and food products, including wheat and fertilizers.” At the same time, investors welcomed headlines indicating that Russian gas giant Gazprom would resume its gas provision to the EU as planned on July 21.

Global equities advanced, with European indexes posting substantial gains and Wall Street hitting fresh July highs. Nevertheless, the US Treasury yield curve remains inverted, reflecting persistent recession concerns.

On the data front, the EU confirmed the June Consumer Price Index rose by 8.6% YoY, also reporting the core inflation in the same period at 3.7%, as previously estimated. Construction Output in the Union surged by 0.4% MoM. The US, on the other hand, released June Building Permits, which declined by 0.6% MoM and Housing Starts for the same month, down 2%. On Wednesday, the macroeconomic calendar will include the June German Producer Price Index, while the EU will release July Consumer Confidence. The US calendar will be quite light, as the country will offer June Existing Home Sales.

EUR/USD short-term technical outlook

The EUR/USD pair spent most of the American session around the 1.0230 area, trading between Fibonacci levels. The pair remains above the 38.2% retracement of its latest daily decline measured between 1.0614 and 0.9951 at 1.0204, while the 50% retracement provides resistance at 1.0280. Technical readings in the daily chart hint at further gains once above the latter, particularly as the 20 SMA converges with the Fibonacci level, reinforcing the resistance area. Technical indicators, in the meantime, head firmly higher, although within negative levels.

Bulls lost steam in the near term, and according to the 4-hour chart. A bearish 100 SMA capped advances, while technical indicators have lost their positive momentum and begun retreating from overbought levels. On a positive note, the 20 SMA maintains its upward slope below the current level and converging with a Fibonacci level at around 1.0110. The bullish case will be stronger on a break beyond 1.0280, eyeing then a test of the 1.0360 price zone.

Support levels: 1.0205 1.0160 1.0110

Resistance levels: 1.0280 1.0325 1.0360

View Live Chart for the EUR/USD   

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