EUR/USD Forecast: Gearing up for another run north

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.1244

European Central Bank officials continue to anticipate a rate hike for next week.
United States Retail Sales are expected to have risen by 0.5% MoM in June.
EUR/USD bullish potential intact despite market players turning increasingly cautious.

The EUR/USD pair traded uneventfully in a 50 pips range on Monday, retaining its bullish tone. EUR/USD hovers around 1.1240 as the American session ends after meeting buyers around the 1.1200 figure at the beginning of the week.

The ruling optimism was partially overshadowed by tepid Chinese data, as the Q2 Gross Domestic Product (GDP) missed expectations by printing 6.3% YoY. Nevertheless, and despite a scarce macroeconomic calendar throughout the rest of the day, the US Dollar maintained its weak tone, giving up, particularly during US trading hours.

European Central Bank (ECB) officials entrained market players but failed to provide fresh clues. Policymaker Boštjan Vasle repeated they would need “ to keep tightening policy at our next meeting” amid resilient core inflation. Also, Governing Council Joachim Nagel said the ECB must raise interest rates again this month and will base its decision at the following meeting on data.

Finally, President Christine Lagarde delivered pre-recorded opening remarks at the ECB conference on central, eastern and south-eastern European countries in Frankfurt and referred to 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 said when referring to the Russia-Ukraine war.

The Federal Reserve (Fed) and the ECB will announce their decisions on monetary policy next week.

On the other hand, the United States (US) published the NY Empire State Manufacturing Index, printed at 1.1 in July, below the previous 6.6 but beating expectations. The country will publish June Retail Sales on Tuesday, alongside Industrial Production and Capacity Utilization for the same month.

EUR/USD short-term technical outlook

The EUR/USD pair has added a few pips to its monthly rally, peaking at 1.1248 and trading not far below the level ahead of the new day’s opening. From a technical perspective, the pair remains overbought, although there are no signs of upward exhaustion, and it may well resume its run.

In the daily chart, EUR/USD develops far above all its moving averages, with the 20 Simple Moving Average (SMA) accelerating north above the longer ones. The mentioned SMA stands below the 1.1000 threshold, reflecting buyers’ strength. At the same time, the Momentum indicator turned marginally lower but remains well above its midline, while the Relative Strength Index (RSI) indicator consolidates around 74.

The 4-hour chart shows that the pair met buyers around a bullish 20 SMA, currently providing dynamic support at around 1.1200. Meanwhile, the 100 and 200 SMAs aim north, although roughly 300 pips below the current level. Finally, the Momentum indicator extends its slump within positive levels, while the RSI extends its consolidative phase within overbought levels.

Support levels: 1.1180 1.1150 1.1110

Resistance levels: 1.1250 1.1295 1.1230

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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