EUR/USD Forecast: Bulls looking for a reason to keep buying
|EUR/USD Current Price: 1.1226
- European Central Bank officials repeat their well-known hawkish message.
- US Dollar broad weakness persists despite a more cautious market stance.
- EUR/USD consolidates gains above 1.1200, has room to extend its advance.
The EUR/USD pair consolidates gains near a multi-month high of 1.1248, with the US Dollar paring losses but unable to correct last week’s sell-off. The week started in slow motion as the financial markets continues to asses United States easing inflation and its implications for the upcoming Federal Reserve (Fed) monetary policy´s decision next week. Optimism partially receded but not enough to help the Greenback. The broad weakness of the American currency is evident through the Dollar Index (DXY), currently stuck around 100.
The macroeconomic calendar will be scarce this week as the focus shifts to the Fed and the European Central Bank (ECB) meetings next week. Additionally, the US will release the PCE inflation index, Fed’s favorite inflation measure. Ahead of the announcements, Fed officials entered a blackout period, although comments from European ones keep hitting the wires.
ECB policymaker Boštjan Vasle repeated they would need “ to keep tightening policy at our next meeting” amid resilient core inflation. President Christine Lagarde, on the other hand, delivered pre-recorded opening remarks at the ECB conference on central, eastern and south-eastern European countries in Frankfurt, particularly referring to how the Ukraine-Russia war affects growth. “GDP has plateaued. And we are also seeing rising levels of protectionism as countries reconfigure their supply chains to align with new strategic goals. Over the last decade, the number of trade restrictions in place has increased tenfold,” Lagarde noted.
Ahead of Wall Street’s opening, the US published the NY Empire State Manufacturing Index, printed at 1.1 in July, below the previous 6.6 but beating expectations.
EUR/USD short-term technical outlook
The daily chart for the EUR/USD pair shows it trades in a tight range, losing upward strength but far from turning bearish. The pair trades above a bullish 20 Simple Moving Average (SMA), which accelerates north above also bullish longer ones, in line with the dominant trend. Finally, the Momentum indicator turned marginally lower but remains well above its midline, while the Relative Strength Index (RSI) indicator consolidates around 74.
In the near term, and according to the 4-hour chart, technical indicators correct extreme readings, although the RSI is still developing within overbought levels. At the same time, the 20 SMA heads firmly higher, far above the longer ones, which also offer bullish slopes. Overall, the pair is set to continue advancing, although a corrective slide is not out of the picture for now.
Support levels: 1.1180 1.1150 1.1110
Resistance levels: 1.1250 1.1295 1.1230
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