- EURUSD price is juggling in an 11-pips range as bulls are gearing up for a further upside.
- Dollar sell-off is expected to continue further as inflation is expected to reach its full potential sooner.
- First-time rate hike by ECB in 11 years will trim the Fed-ECB policy divergence.
EURUSD price has turned sideways after a perpendicular upside move recorded on Tuesday from a low of 1.0119. The asset is displaying back and forth moves in a narrow range of 1.0222-1.0233 and is expected to resume the north-side move amid broader strength in the shared currency bulls. The pair has recorded a fresh weekly high at 1.0270 and may extend its gains after violation of the same.
Meanwhile, the US dollar index (DXY) has established below 107.00 comfortably. The DXY witnessed a steep fall on Tuesday after violating Monday’s low at 106.89. The asset has shifted into a consolidation phase and is displaying topsy-turvy moves in a range of 106.40-106.78. It is worth noting that the asset has registered a fall of more than 2.60% from its recent 19-year high of 109.30. Considering the downside momentum, more losses are on the table and the asset may find a cushion around 105.50.
Also Read: EUR/USD Forecast: Bears on pause ahead of the ECB
ECB President Christine Lagarde to elevate interest rates by 25 or 50 bps
Dollar sell-off to continue as inflation sees peak
The DXY is expected to continue its downside rush as the market participants are expecting that inflation has reached its potential. Oil prices have remained vulnerable in the month of July and lower valued ‘paychecks’ received by the households have forced them to drop their consumption quantity-wise. A slippage in overall demand and oil-driven inflation will result in a lower inflation rate.
Odds of a 1% rate hike by the Fed have tumbled
The chances of a 100 basis points (bps) rate hike announcement by the Federal Reserve (Fed) have tumbled as long-run inflation expectations have slipped to 2.8% from the June print of 3.1%. As per CME’s FedWatch Tool, the expectations of a rate hike by 1% were as high as 80% last week, which have trimmed to near 30%. This has been a major reason behind the firmer rally in the EURUSD price.
S&P Global PMI to remain in focus
Due to a light economic calendar this week, investors’ focus will remain on the release of the S&P Global PMI data. As per the market consensus, the economic catalysts are expected to deliver a weak performance. The Global Composite data is seen at 51.7, lower than the prior release of 52.3. The Manufacturing PMI may slip to 52 vs. 52.7 recorded earlier. While the Services PMI is expected to display a mild correction to 52.6 against the former figure of 52.7. This will keep the DXY on the back foot and may support the shared currency bulls.
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EURUSD price to benefit from hawkish ECB bets
EURUSD price is going to remain upbeat as investors are expecting a rate hike by the European Central Bank (ECB) on Thursday. The central bank is keeping a neutral stance on the interest rates for the past 11 years. A rate hike by 25 or 50 basis points (bps) is expected this time as investors believe that the ECB is left with no other alternative than to paddle up its borrowing rates in order to fix the inflation mess. A rate hike announcement by the ECB will trim the Fed-ECB policy divergence.
EURUSD technical analysis
EURUSD is forming a Bullish Flag on an hourly scale that signals an inventory distribution after a sheer upside move. The ongoing inventory distribution in a range of 1.0221-1.0268 is indicating the execution of longs by those market participants, which prefer to enter a trend after the establishment of a bullish bias.
Advancing 20- and 50-period Exponential Moving Averages (EMAs) at 1.0217 and 1.0173 respectively add to the upside filters.
Also, the Relative Strength Index (RSI) (14) is oscillating in the 60.00-80.00 range, which signals the continuation of a bullish momentum ahead.
A breach of Tuesday’s high at 1.0269 will drive the asset towards the round-level resistance at 1.0300, followed by July 1 low at 1.0366.
Alternatively, the greenback bulls could gain control if the asset drops below Monday’s low at 1.0081. An occurrence of the same will drag the asset towards the psychological support at 1.0000. A breach of the psychological support will expose the greenback bulls to recapture its two-year low at 0.9952.
EURUSD hourly chart
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Elliott Wave Trading Strategies: DAX 40, FTSE 100, STOXX 50, DXY, EUR/USD
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