EUR/USD analysis: Central banks divergences beginning to dwindle

EUR/USD Current price: 1.1469

Weaker than expected US data released on Friday sent the greenback down across the board, with the EUR/USD pair ending Friday at 1.1469, not far from a fresh yearly high of 1.1489 set last week. US inflation for June came in flat, disappointing for a fourth consecutive month, up by 1.6% from a year earlier. Core CPI YoY resulted at 1.7% the lowest in over two years. Retail Sales also came below market's expectations, falling 0.2% in June, down for a second consecutive month, while consumer confidence, according to the Michigan index, fell down to 93.1 for July against previous 95.1.

The Fed is still in the path of rising rates for a third time this year and shrinking its balance sheet, according to Yellen's semi-annual testimony before the Congress, but she also said that not much more hikes are required to reach "normal." The figures released on Friday may it tougher for the central bank to continue with its tightening policy, while for the ECB, expectations built for QE tapering, with the market expecting some sort of announcement in the September meeting, not the one that will take place this upcoming week. Divergences on economic policies between the two institutions are beginning to dwindle, but still present, preventing the pair for breaking higher.

From a technical point of view the pair retains a bullish bias, albeit still unable to clearly surpass the current 1.1460 region,  from where the pair retreated multiple times since January 2015. In the daily chart, technical indicators resumed their advances within positive territory after correcting overbought conditions,  whilst the 20 DMA heads below the current level and around a daily ascendant trend line coming from June 28th, all of which favors additional advances. In the 4 hours chart, the price settled above its 20 SMA, whilst technical indicators advanced above their mid-lines, also supporting additional gains on a break above 1.1490, the yearly low and immediate resistance.

Support levels: 1.1420 1.1380 1.1340

Resistance levels: 1.1490 1.1525 1.1560

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