Market participants swiftly adjusted their expectations after the release of last week’s disappointing US CPI report. Moving away from more hawkish predictions, investors now anticipate the July rate hike to be the last one for this particular cycle. The robust labor market and rising consumer sentiment have instilled confidence in a soft-landing scenario. Therefore, inflation eases toward the target without negatively impacting economic growth. As a result, positive risk sentiment has emerged, leading to further weakening of the EUR/USD investing pair.
The European Central Bank (ECB) has already confirmed its intention to implement a rate hike in July, which could impact the September decision depending on future data. However, ECB members have emphasized the uncertainty surrounding the September hike, emphasizing that it will rely on forthcoming economic indicators.
Positive Economic Indicators Point to Soft-Landing Scenario, Weakening USD
EUR/USD Technical Analysis – Daily Timeframe
Analyzing the daily chart, it becomes evident that EUR/USD has been experiencing a robust rally for over a week. Simultaneously, a minimal pullback occurred. The price has even broken out of the upper bound of the rising wedge pattern, signaling exceptionally strong momentum, which may persist even after potential pullbacks. Additionally, the distance from the blue 8 moving average suggests that the price is now overstretched. In light of these indicators, some consolidation or a pullback toward the moving average could occur before any major moves.
EUR/USD Technical Analysis – 4-hour Timeframe
Examining the 4-hour chart, we observe that the price broke out of the descending triangle pattern and continued to rally with shallow pullbacks toward the blue 8-moving average. This signifies significant momentum; however, recent consolidation at the highs may indicate weakening momentum. As a result, the market may experience further consolidation or a pullback in the near future.
100 EUR to USD Rate Technical Analysis – 1-hour Timeframe
A close analysis of the 1-hour chart reveals that EUR/USD has been trading within a tight range since last Friday. Buyers are likely to position themselves near the blue trendline, assuming a defined risk below it, with the objective of targeting new higher highs. Conversely, sellers might wait for the price to fall below the upper bound of the rising wedge, confirming a fakeout and potentially triggering a selloff towards the lower bound of the wedge.
Upcoming Events
Today, the US Retail Sales report is scheduled for release, followed by US Jobless Claims on Thursday. Given the current market sentiment, positive data might present a buying opportunity for the dip in the EUR/USD investing, while negative data could lead to increased US dollar selling. Only exceptionally poor figures are expected to drive a broad USD buying as a safe haven.
